Adjustable-Rate Mortgages (ARM)

Take advantage of flexible interest rates with adjustable-rate home loans.

What is an adjustable-rate mortgage (ARM)?

ARMs, or variable-rate mortgages, have interest rates that adjust over time based on market conditions. These home loan options start with a fixed rate for a specified number of years (usually 5, 7, or 10 years), after which the interest rate is adjusted at set intervals throughout the year, depending on the loan terms. Generally, there are caps on how far up or down adjustable-rate mortgage rates can change. 

5/6 ARM

A common adjustable-rate loan is the 5/6 ARM. With this loan, your mortgage will have a fixed interest rate for the first 5 years and adjust once every six months after that. 

7/6 ARM

With a 7/6 ARM, your mortgage will have a fixed interest rate for the first 7 years with a rate adjustment once every six months after that. 

10/6 ARM

Another typical ARM loan is the 10/6. With this loan, ARM rates stay fixed for the first 10 years, then the interest rate adjusts once every six months. 

Benefits of ARM loans

ARMs are most attractive to those planning on owning their home for a short period because they work like a fixed-rate loan during the introductory period. For some, the stable initial interest rate could help their financial situation by keeping monthly payments consistent. 

Better rates

ARM loans usually have lower starting interest rates than 30-year fixed loans. 

Lower monthly payments

The initial fixed-rate period or a downward trend in ARM rates could save you money on your monthly payment. 

Greater potential savings

You can lock in greater savings if interest rates decline after your fixed-rate term. 

Protection from volatility

Adjustable-rate loans have mortgage caps that prevent your rate from going too high or too low, protecting your monthly payment from market volatility. 

How to get an adjustable-rate mortgage

1 Get to know your finances

Lenders consider your loan approval by looking at your credit score, debt-to-income (DTI) ratio, income stability, and down payment amount. When all this information is put together, it creates your overall financial profile, and a stronger financial profile could mean better ARM terms.  

2 Compare your ARM loan options

Loan Experts at AmeriSave can help you compare different structures of ARM loans — 5/1 vs. 5/6, 7/6, or 10/6 — to help you determine which works best for your home-buying goals.  

3 Get prequalified

Prequalification is an early step that gives you a ballpark idea of how much home you can afford. You’ll share basic financial details — like your income, assets, and debt — and in return, you’ll get an estimate of your loan amount and potential terms. It’s quick, doesn’t require documentation or a credit pull, and shows real estate agents that you’re starting your financing journey. 

4 Get a Certified Preapproval

AmeriSave’s Certified Approval is a deeper dive into your finances — and a much stronger signal to sellers. You’ll submit documentation (like W-2s, pay stubs, and bank statements), and your credit and income will be reviewed and verified. If everything checks out, you’ll receive a Certified Approval letter showing how much you can borrow. This letter gives you the power to shop and confidently make offers — almost like a cash buyer. 

5 Lock-in your rate

ARM loans come with initial fixed-rate periods, but AmeriSave gives you added peace of mind with a 90-day rate lock. That means you can lock in your quoted interest rate while finalizing your home search, protecting you from market fluctuations. 

6 Close on your new home

Once the paperwork and terms of your adjustable-rate loan are done, it’s time to buy your new home. You’ll go to your closing appointment at the title company or attorney’s office, sign your paperwork, pay your closing costs, and get your keys.  

Veron M. | Lawrenceville, GA

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Frequently Asked Questions

One of the main advantages of an adjustable-rate loan is the initial lower interest rate term, where your monthly payment will remain the same for the initial period before rate adjustments start. This helps with budgeting because you’ll know how much your monthly principal and interest payments will be for 5, 7, or 10 years.

As you explore different types of home loans, choosing between an ARM loan and a fixed-rate loan will depend on your financial profile and risk tolerance as well as market rates. If you don’t plan on staying in your home for a long period, usually less than 10 years, then an ARM could be a good option to take advantage of the initial lower interest rate. However, a fixed-rate loan may be the better option if you prefer predictability. 

To help you decide between an adjustable or fixed rate, speak with one of our Loan Experts to discuss your loan options. 

Yes, you can refinance an ARM loan. Refinancing can help you secure a lower interest rate or change the terms of your loan.  

Yes, an adjustable-rate mortgage (ARM) and a variable-rate mortgage are the same. Both terms refer to a home loan with an upfront fixed-rate period and scheduled rate increases afterward.  

Yes, you can pay off your ARM loan early. Making extra payments — or paying off the loan entirely ahead of schedule — can help you save on interest over time, especially if you plan to stay in your home beyond the initial fixed-rate period. 

Some ARM loans come with prepayment penalties, which are fees charged if you pay off your loan within a certain time frame (usually the first few years). AmeriSave doesn’t include prepayment penalties on any of our ARM loans. 

After the initial fixed-rate period, an ARM loan’s interest rate adjusts periodically based on an underlying market index such as the prime rate or the Secured Overnight Financing Rate (SOFR). Your adjusted rate is the index rate plus a set margin determined by your lender. ARMs also come with rate caps that protect you from large increases in interest rates.  

Who qualifies for a Home Possible® loan?

Borrowers with incomes at or below 80% of the AMI may qualify for a Home Possible® mortgage. You may also qualify if you require a non-occupant co-borrower to help support your loan application.

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