Adjustable-Rate Mortgages (ARM) Your Comprehensive Guide

Adjustable-rate mortgages (ARMs) are a popular choice for homebuyers and homeowners who anticipate changes in their financial situation, plan to move, or will refinance within a few years.

Pros:

• Depending on the market, ARMs can offer lower initial interest rates than a fixed-rate mortgage
• Depending on the market, ARMs can offer lower initial monthly payments
• Flexibility for borrowers who plan to sell or refinance before the adjustment period begins
• Many ARMs come with caps on how much the interest rate can increase at each adjustment and over the life of the loan

Cons:

• The interest rate can increase after the initial fixed-rate period, leading to higher monthly payments
• Borrowers may face payment fluctuations, making it harder to budget for long-term financial planning
• ARMs can be more complicated than fixed-rate mortgages, with terms and conditions that may be difficult for some borrowers to understand

Best for:

• People planning to sell or refinance their home within a few years
• Homebuyers that anticipate a significant income increase (promotion, business growth, etc.)
• An investor looking to minimize initial monthly payments
• Borrowers who are financially knowledgeable and comfortable with the risks of potential future changes to the loan’s rate and payments

What are adjustable-rate mortgages?

Adjustable-rate mortgages (ARMs) are a type of home loan with interest rates that can change periodically. Unlike fixed-rate mortgages, which remain constant for the entire loan term, ARMs begin with a fixed interest rate for an initial period and then adjust at specified intervals based on market conditions.

Terms for adjustable-rate loans

Adjustable-rate mortgages offer a variety of term structures that dictate how and when the interest rate changes over the life of the loan. These can include:

• Initial fixed-rate period
• Adjustment frequency
• Rate caps
• Index and margin

Am I eligible for an ARM loan?

Eligibility for an adjustable-rate mortgage loan is determined by your credit score, debt-to-income ratio, down payment, income and employment history, loan-to-value ratio, savings, and the property type you hope to buy.

Quick homebuyer tools

Use these resources to calculate numbers and check your credit status.

• Debt-to-income ratio calculations
• Credit score information
• Credit report information

Is an adjustable-rate mortgage right for my financial situation?

Looking for an expert opinion? A Summit Mortgage loan officer can help you determine if today is the right time for an adjustable-rate home loan.

Schedule a free consultation

A local Summit Mortgage loan officer has the expertise to guide your decision-making process, answer questions, and get you approved with the best adjustable rate mortgage loan program for your unique situation. Find a loan officer who’s right for you.

Calculate your potential savings

Use our mortgage calculator to estimate your monthly payment by adjusting factors like purchase price, down payment, interest rate, and term. Then, connect with a loan officer to explore mortgage and refinance options that fit your budget.

How do I apply for an adjustable-rate loan?

Applying for a adjustable-rate loan or determining if this type of loan is right for you is simple! Use our Quick Start Form to connect with a Summit Mortgage loan officer who can help guide you through the process.

Curious about what comes next? View our step-by-step application checklist to learn about the process and take your first step toward homeownership.

Is an adjustable mortgage loan right for you?

Schedule a free consultation with our mortgage experts

Summit Mortgage employs some of the most experienced loan officers in the country. Our in-depth knowledge of adjustable-rate loans, combined with our commitment to understanding your goals, will ensure your homebuying experience is as smooth and rewarding as possible. Find a loan officer near you.

Next steps to find your home loan

Congratulations, you’re on your way to finding the loan that’s right for you. If you’re ready to get matched with a Summit Loan Officer to help you with the next steps, use our Quick Start Form.

If you’d like more information first, explore our online resources to learn about the key questions to ask your lender.

• Download our homebuyer guide
• Calculate how much home you can afford
• Browse loan types
• Learn how to apply