Adjustable-Rate Mortgages
Lower initial rates with a fixed period — ideal for borrowers who plan to move, refinance, or pay down their loan within 5–10 years.
Program Overview
An adjustable-rate mortgage (ARM) offers a fixed interest rate for an initial period — typically 5, 7, or 10 years — after which the rate adjusts periodically based on a market index plus a margin. ARMs often start with lower rates than comparable fixed-rate mortgages, which can mean significant savings during the fixed period. They are available through conventional, jumbo, and non-QM programs.
Who Is This Loan For?
- ✓ Borrowers planning to move or sell within 5–10 years
- ✓ Buyers who expect income growth and plan to refinance
- ✓ Borrowers who want the lowest possible initial payment
- ✓ Jumbo borrowers (ARMs are especially competitive in jumbo)
Key Benefits
Lower Initial Rate
ARM rates are typically 0.25–1% lower than comparable fixed rates during the initial period.
Fixed-Period Protection
5, 7, or 10 years of rate stability before any adjustment occurs.
Rate Caps
Limits on how much the rate can increase per adjustment and over the life of the loan.
Potential Savings
If you sell, refinance, or pay off before the fixed period ends, you benefit from the lower rate without ever facing an adjustment.
Qualification at a Glance
General Requirements
- Same as fixed-rate for the chosen program
- Qualified at the note rate or fully-indexed rate, depending on the program
- Available for conventional, jumbo, and non-QM
Advantages
- ✓ Lower initial rate and payment
- ✓ Fixed-period stability
- ✓ Rate caps protect against extreme increases
- ✓ Ideal for shorter hold periods
- ✓ Strong jumbo ARM pricing
Tradeoffs to Consider
- ↔ Rate will adjust after the fixed period
- ↔ Payment could increase significantly after initial period
- ↔ Less predictable long-term than fixed-rate
- ↔ More complex structure to understand
- ↔ Risk if you end up staying longer than planned
Common Scenarios
Relocating Professional
A professional who moves every 5–7 years for work selects a 7/1 ARM, saving $300/month compared to a 30-year fixed — and plans to sell before any adjustment.
Jumbo Buyer Optimizing Rate
A buyer financing $1.5M chooses a 10/1 ARM with a rate 0.75% below the fixed option. Over 10 years, this saves over $100,000 in interest.
Documents Typically Needed
- Standard documentation for the chosen program
Frequently Asked Questions
The first number is the fixed period in years. The second is how often the rate adjusts after that. A 7/1 ARM is fixed for 7 years, then adjusts annually.
Broker Disclosure: Scout Financial Group Inc DBA Airus Lending is a licensed mortgage broker (NMLS #2187418) and does not make loans or credit decisions. Airus Lending works with multiple wholesale lenders to help borrowers compare available loan options. Final approval depends on the lender, automated underwriting findings, documentation, state requirements, and overall borrower profile. Not all applicants will qualify.