What is an Adjustable-Rate Mortgage Loan?

An adjustable-rate mortgage (ARM), sometimes called a variable-rate mortgage, is a home loan that starts with a fixed interest rate and then adjusts over time.
For an initial period—such as 5, 7, or 10 years—your interest rate stays the same. After that period ends, the rate can change at regular intervals (typically annually), depending on market conditions.
ARM loans usually begin with a lower interest rate than a fixed-rate mortgage, which can mean lower initial monthly payments. Once the adjustment period begins, your rate is determined by a market index (such as the Federal Funds Rate or a similar benchmark) plus a set margin added by the lender.
In short, an ARM can offer short-term savings upfront, with the understanding that the rate—and payment—may change in the future.

Who Should Consider an Adjustable-Rate Mortgage Loan?

  • Homebuyers planning to sell/refinance before rate changes
  • Borrowers with short-term plans (e.g., 5-7 years)
  • Borrowers comfortable with future rate variability

Fixed Vs Adjustable

Feature
Adjustable-Rate Mortgage
Fixed-Rate Mortgage
Initial Rate
Lower
Higher
Predictability
Variable after initial period
Same throughout
Best For
Short/medium term owners
Long-term, risk-averse
Typical Use Case
Buyers who plan to move/refinance
First-time homeowners

Your Property is Ineligible for a Refinance or Cash-Out Refinance If…

…it was listed for sale within the previous six months of the date you apply.
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