Adjustable-Rate Mortgage (ARM): The Home Loan That Moves with the Market
In this guide, we’ll answer exactly what an Adjustable-Rate Mortgage (ARM) is, who it’s best for, and situations where an ARM makes the most sense.
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What Is An Adjustable-Rate Mortgage?
- A lower interest rate for the introductory period, which then adjusts based on market conditions at specific intervals of time determined when the loan is originated.
- Less predictable monthly payments after the introductory period. Depending on market conditions, your monthly payment could rise or drop over time.
- Can be used for primary residences, second homes, or investment properties
Quick Answer
An ARM is ideal if you plan to move or refinance after a couple of years, want lower monthly payments for the first couple of years of the loan, and are comfortable with the risk of higher payments after the introductory rate period has ended.
Why Consider an Adjustable-Rate Mortgage?
Here's why some homebuyers choose an adjustable-rate mortgage.
Lower Initial Rate
The introductory interest rate of an ARM, which typically lasts three, five, seven, or 10 years, is usually lower than a 30-year conventional loan. That intro rate is typically lower with a shorter fixed-rate period, meaning that you’d get a lower quoted rate for a 3-year ARM vs. a 10-year ARM.
Not Buying a 'Forever Home'
If homeowners plan to move or refinance before their introductory period ends, an ARM can help them lock in a lower payment than a fixed-rate mortgage.
Confidence That Rates Will Drop
While ARMs pose risk for monthly payments to increase if mortgage rates increase, they also offer the potential for a lower payment if rates drop between adjustment periods.
Guarantee That Income Will Rise Over Time
The biggest risk of an ARM is that your monthly payment could increase significantly if rates rise. If you know that your income will also rise, it mitigates some of the risk of an ARM.
Flexible Property Use
Buy a single-family home, condo, second home, or investment property.
Credit-Friendly
Credit score requirements start around 620, with 680+ earning the best rates.
Pro Tip
If you later decide that you prefer the predictability and stability of a fixed interest rate, you can refinance out of your adjustable-rate mortgage and into a fixed-rate option.
Adjustable-Rate Mortgage Eligibility Requirements in 2025
Credit Score
620 minimum (680+ for best rates)
Down Payment
3%-5% (minimum) | +20% to skip PMI
Debt-to-Income (DTI)
≤ 45% (varies by borrower profile)
Mortgage Insurance (PMI)
Required if you put < 20% down
Property Types Allowed
Primary home, second home, condo, investment
Compare Adjustable-Rate Mortgages vs. Other Mortgage Options
Adjustable-Rate Mortgages
30-Year Fixed Loan
FHA Loan
How to Apply for an Adjustable-Rate Mortgage
Pre-Qualification (60 Seconds)
Answer a few questions online or with a UMortgage Loan Originator.
Get Custom Loan Options
We’ll show you rates, payment estimates, and a closing cost breakdown.
Lock In Your Interest Rate
Choose to lock when you see a competitive rate to avoid surprises down the line.
Underwriting & Closing Your Loan
Submit documentation, clear underwriting, and close on your timeline.
Find your monthly payment.
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Estimated Monthly Payment
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The UMortgage mortgage calculators are for estimation purposes only. This is not a commitment to lend. For an exact quote based on your individual financial circumstances, please contact us.
Frequently Asked Questions About ARMs
Wondering if an adjustable-rate mortgage makes sense for you? Get clear, expert answers to the most common questions: cost, timing, benefits, and more!
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