What is an adjustable rate mortgage (ARM)?

An ARM has an interest rate that can change after an initial fixed period (e.g., 5, 7, or 10 years). The rate is tied to an index plus a margin and adjusts periodically.

What does 5/1 or 7/1 ARM mean?

The first number is the initial fixed period in years; the second is how often the rate can adjust after that (e.g., 5/1 = fixed for 5 years, then adjusts annually).

ARMs have caps that limit how much the rate can change at each adjustment and over the life of the loan. These protect you from large payment spikes.

When does an ARM make sense?

ARMs can make sense if you plan to sell or refinance before the first adjustment, or expect rates to stay low. Compare with fixed rates. See Fixed vs Adjustable Rate Mortgage.

What Is an Adjustable Rate Mortgage?

Disclaimer: This website provides general mortgage and financial information for educational purposes only. It does not constitute financial, legal, or mortgage advice. Housentia is not a licensed mortgage broker, lender, or loan originator.

This content is provided for general educational purposes only and does not constitute financial, legal, or mortgage advice.

Introduction

An adjustable rate mortgage (ARM) has an interest rate that can change after an initial fixed period. Common types include 5/1, 7/1, and 10/1 ARMs. The rate is tied to an index (e.g., SOFR) plus a margin. See What Is a Fixed Rate Mortgage and Fixed vs Adjustable Rate Mortgage.

Frequently Asked Questions

What is an adjustable rate mortgage (ARM)?: An ARM has an interest rate that can change after an initial fixed period (e.g., 5, 7, or 10 years). The rate is tied to an index plus a margin and adjusts periodically.
What does 5/1 or 7/1 ARM mean?: The first number is the initial fixed period in years; the second is how often the rate can adjust after that (e.g., 5/1 = fixed for 5 years, then adjusts annually).
What are rate caps?: ARMs have caps that limit how much the rate can change at each adjustment and over the life of the loan. These protect you from large payment spikes.
When does an ARM make sense?: ARMs can make sense if you plan to sell or refinance before the first adjustment, or expect rates to stay low. Compare with fixed rates. See Fixed vs Adjustable Rate Mortgage.

Educational Disclaimer

This content is provided for general educational purposes only and does not constitute financial, legal, or mortgage advice.

Housentia is not a lender, mortgage broker, or loan originator.

ARM terms and caps vary by lender.