Lower intro rate · Purchase & refinance
Adjustable-rate mortgages (ARM)
- Starts 0.5–1% below a 30-year fixed
- Fixed for 5, 7, or 10 years
- Caps limit every adjustment
What is an adjustable-rate mortgage?
An adjustable-rate mortgage has a fixed interest rate for an initial period, commonly 5, 7, or 10 years, then adjusts every six months based on the SOFR index plus a margin. ARMs usually start 0.5% to 1% below 30-year fixed rates and include caps that limit how much the rate can rise at each adjustment and over the life of the loan.
Ways to set it up
Choose these when you lock your rate. You’ll see the cost of each option in dollars.
What you need to qualify
| Requirement | Guideline | Notes |
|---|---|---|
| Structure | 5/6 · 7/6 · 10/6 | First number is fixed years; second is adjustment frequency in months |
| Index | 30-day average SOFR | Plus a margin, typically 2.75% – 3.00% |
| Rate caps | 2/1/5 or 5/1/5 | First adjustment / each later adjustment / lifetime cap above start rate |
| Minimum credit score | 620 conforming · 700 jumbo | Same as the underlying conventional or jumbo program |
| Down payment | 5% conforming · 10% jumbo | Same as fixed-rate equivalents |
| Qualifying rate | Greater of note rate or fully indexed rate | For 5/6 ARMs, you qualify at the higher rate |
Check the basics
A quick starting point, not an approval. Three questions, no credit check. Your full application confirms income, assets, and more.
Answer the questions to see your result.
An estimate based on typical guidelines. Not a pre-approval or commitment to lend.
Pros and cons
Pros
- Lower rate and payment for the first 5–10 years
- Rate can fall if the market does
- Caps limit how much the rate can rise
- No penalty to refinance or sell early
Cons
- Payment can rise after the fixed period
- Harder to budget long term
- Savings disappear if the fixed-rate gap is small
Common questions
What does 5/6 ARM mean?
The rate is fixed for the first 5 years, then adjusts every 6 months for the remaining 25 years based on the SOFR index plus a margin.
How much lower are ARM rates than fixed rates?
Typically 0.5% to 1% below the 30-year fixed, though the gap changes with the market.
What are ARM rate caps?
Caps limit rate changes. A 2/1/5 structure means up to 2% at the first adjustment, 1% at each later adjustment, and 5% total above your starting rate over the life of the loan.
Can my payment go down with an ARM?
Yes. If SOFR falls, your rate adjusts downward at the next adjustment date, subject to the floor set by the margin.
Is there a prepayment penalty on an ARM?
No. Conforming and nearly all jumbo ARMs can be refinanced or paid off at any time without penalty.
How do I qualify for an ARM?
For 5/6 ARMs you qualify at the greater of the note rate plus 2% or the fully indexed rate. For 7/6 and 10/6 ARMs, you qualify at the note rate, which makes them easier to qualify for.
Is an ARM a good idea right now?
It depends on how long you will hold the loan and the size of the discount. If you will move or refinance within the fixed period and the ARM is at least 0.5% lower, it often saves money.
What is the difference between a 7/6 and a 10/6 ARM?
The 10/6 stays fixed three years longer in exchange for a slightly higher starting rate. Choose based on how long you expect to keep the loan.
Keep exploring
See what an adjustable-rate mortgage costs for you.
Enter a few details to see your rate, points, and monthly payment. No credit check. No phone number.
Disclosures
- ARM rates may increase after consummation. Caps shown are typical; your note governs.
- For 5/6 ARMs, you qualify at the greater of the note rate plus 2% or the fully indexed rate.
- Rates, terms, and programs are subject to change without notice and to credit and property approval. Not all applicants will qualify.
- Lendid Loans, LLC is a licensed mortgage broker in Texas, Florida, Colorado, and Oklahoma. All loans originated through Lendid Direct are brokered by Lendid Loans, LLC. This is not a commitment to lend. Programs, rates, terms, and conditions are subject to change without notice. All loans subject to credit approval. NMLS# 1470572.
- Equal Housing Opportunity.