Look beyond the first payment
Review the initial fixed period, adjustment frequency, index, margin, and rate caps together.
Adjustable-rate mortgages
Understand the change before you choose it.
An adjustable-rate mortgage, or ARM, typically begins with an initial fixed-rate period. After that, the rate can adjust according to the loan’s terms. Your timeline matters, but so does a plan for staying longer.
When to consider adjustable-rate mortgages
You want to compare an initial fixed period with a fixed-rate loan and understand how future adjustments could affect your budget.
Prepare for a different timeline
A future move or refinance is not guaranteed. Consider whether the payment would remain manageable if you kept the ARM after its first adjustment.
Compare the tradeoff clearly
An initial rate advantage can matter, but potential payment changes should be part of the decision from the beginning.
Know what happens after the fixed period
Which terms determine a future adjustment?
The initial fixed period tells you when adjustments can begin. The index, margin, adjustment frequency, and caps help determine how the rate may change. Review those terms in the actual loan offer.
What if I cannot refinance before the rate changes?
Compare the potential payment under the loan’s adjustment limits with a payment you could sustain. Treat a future sale or refinance as a possibility, not a requirement for affording the loan.
Learn more: CFPB: Fixed and adjustable rates. Program and lender requirements vary.
Your next step
Ask for the adjustment schedule.
Bring the ARM offer alongside a fixed-rate offer. We can review the initial payment, adjustment limits, and your plan if you stay longer than expected.