Quick Answer: An ARM (Adjustable-Rate Mortgage) begins with a low, fixed interest rate for a set period, usually 5, 7, or 10 years then adjusts annually based on the market. It offers lower initial payments, ideal for buyers planning short-term stays or expecting income growth.  Buying a home comes with exciting possibilities and plenty of options when it comes to financing. One increasingly popular choice among savvy homebuyers is the adjustable-rate mortgage or ARM. But how does an ARM mortgage work, and is it right for you? Let’s break it down.

What is an ARM Mortgage?

An ARM starts with a fixed interest rate for an introductory period, commonly 5, 7, or 10 years. During this phase, your rate is locked in and typically lower than fixed-rate mortgages, offering substantial savings on monthly payments.

After the fixed period, the rate adjusts annually based on a financial index plus a set margin. This means your payments could go up or down depending on market trends.

The Advantage of an ARM 

Whether you’re buying a first home, relocating for work, or investing in property, ARMs provide:

• Lower Initial Payments: Ideal for budgeting in the early years.
• Flexibility: Great for buyers who plan to refinance, relocate, or upgrade within a few years.
• Affordability: Qualify for more home thanks to the lower starting rate.

If your goal is to move within five to seven years or you expect your income to increase, an ARM lets you take advantage of low rates upfront and potentially sell or refinance before adjustments begin.

Is an ARM the Right Choice?

Some homebuyers think an ARM is a bad choice because the rate can change, but that’s not always true. It really depends on your situation. For example, if you’re buying a home or expecting a job transfer in few years, an ARM could save you thousands of dollars in interest. On the other hand, if you plan to stay in your home long-term or prefer steady, predictable payments, a fixed-rate mortgage might give you more peace of mind. The key is to know your financial goals and how long you plan to keep the home.

Ready to Explore Your Options?

At CCCU, we help homebuyers find mortgage solutions that match their goals. Whether you’re considering an ARM or a fixed-rate loan, we’re here to guide you. Call our mortgage team at 702-228-2228 to find out whether an ARM is your best financing option.