An adjustable-rate mortgage, or ARM, offers a lower initial interest rate than a fixed-rate loan in exchange for a rate that can change after an introductory period. Choosing the right one starts with understanding how they’re structured.
Reading the numbers
An ARM is typically labeled with two numbers, like 5/1 or 7/6 – the first is how many years the rate stays fixed, the second is how often it can adjust afterward (in years or months). A 5/1 ARM has a fixed rate for five years, then adjusts annually.
Know the caps
Every ARM has rate caps limiting how much the rate can increase at each adjustment and over the life of the loan – understanding these caps tells you your true worst-case payment.
Who an ARM makes sense for
Buyers who plan to sell or refinance before the fixed period ends, or who expect their income to grow, often benefit most from an ARM’s lower initial rate. Buyers planning to stay long-term typically find more security in a fixed rate.
Not sure which loan type fits your plans? Call Dockside Realty at 850.225.9785 or email christine@docksiderealtyinc.com and we can connect you with a trusted local lender.