A lower starting rate for the years you plan to own

An ARM has two phases: a fixed-rate period (typically 5, 7 or 10 years) where your rate stays the same, followed by an adjustment period where the rate can change based on a market index (usually SOFR) plus a margin, within the loan's caps. ARM starting rates are often lower than comparable 30-year fixed rates, though the difference varies with the market.

The first number is the fixed-rate period in years; the second is how often the rate adjusts after that. Most conforming ARMs today are SOFR-indexed 5/6, 7/6 and 10/6 loans: fixed for 5, 7 or 10 years, then adjusting every 6 months within caps. Some jumbo and portfolio ARMs, such as a 5/1 or 7/1, adjust once a year instead.

Yes. ARMs have an initial adjustment cap (the most the rate can change at the first adjustment), a periodic cap (the most it can change at each later adjustment) and a lifetime cap (the most it can rise over your starting rate). Cap structures vary by loan, so we'll show you the exact caps and a worst-case payment before you commit.

ARMs tend to fit buyers who plan to sell or refinance before the fixed period ends — for example, those expecting a job relocation, buyers planning to move up to a larger home, or investors with a defined exit strategy. If you plan to stay long term, a fixed-rate loan may be the safer choice.

Yes, subject to qualifying at the time. Many ARM borrowers refinance into a fixed-rate mortgage before the adjustment period begins, and most residential ARMs don't carry a prepayment penalty — we'll confirm that in your loan terms. It's worth reviewing your options well ahead of your first adjustment date.

It depends on the market. ARM starting rates are often lower than 30-year fixed rates, but the gap changes over time and is sometimes small. We'll quote an ARM and a fixed-rate loan side by side for your loan amount so you can see the actual difference in payment.