What is an Adjustable Rate Mortgage (ARM)?

An Adjustable Rate Mortgage (ARM) is a loan in which the interest rate remains fixed for an introductory period, and then can adjust up or down based on market index rates. When the rate adjusts, so does your monthly payment. Due to the fact that interest rates for the introductory period are typically lower than most other loans, Adjustable Rate Mortgages can be a great tool if you do not plan on staying in your home long term.


  • Low initial interest rates
  • Down payments as low as 5%
  • Affordable monthly payments
  • Flexibility

How it Works

Adjustable Rate Mortgages have several options to choose from, and can be utilized for both purchases and refinances. Some of the most common ARM loans are 3/1, 5/1, and 7/1 ARMs, with the first number representing the introductory period and the second number representing how often the rate will change after that. For example, with the 5/1 ARM, the initial rate and payment stays the same for the first 5 years, and then adjusts every year after that. During the introductory period of the loan, the rates are normally much lower than that of other loans. Typically, the shorter the introductory period, the lower the interest rate, however once the rate begins to adjust you run the risk of a rate increase.

ARM Image

Reasons to consider an Adjustable Rate Mortgage

  • If you plan to move before the introductory period is over (typically 3-7 years)
  • Smaller monthly payments
  • Low interest rates available for the introductory periods
  • Freedom and flexibility to move more often

Not every loan option is right for every borrower. To get your questions answered and receive more information on what type of loan is best for you, contact us at 1-303-410-2937 or click the button below and allow us to help find a customized loan to fit your specific needs.