(727) 226-1040 (303) 645-4615 (470) 682-4763 (865) 263-3724 Apply

Adjustable Rate Mortgage

A lower rate and payment for the first 5, 7 or 10 years, in exchange for a rate that can move after that. If you expect to sell or refinance before the fixed period ends, an ARM can save real money.

Get pre-qualified Estimate a payment

Licensed in Florida, Tennessee, Georgia and Colorado. NMLS 222883.

5/7/10 yrs
Fixed-rate period before the first adjustment
Lower
Starting rate than a comparable 30 year fixed
Caps
Limit how far the rate can move at each step and overall
5%
Typical minimum down payment

How an adjustable rate mortgage works

An ARM is a 30 year loan in two stages. For the first stage the rate is fixed, just like a fixed-rate mortgage. Today the common options are called 5/6, 7/6 and 10/6 ARMs: the first number is how many years the rate stays fixed, the second is how often it can adjust after that, in months. So a 7/6 ARM is fixed for seven years and then can change every six months for the remaining 23 years.

After the fixed period, the rate is reset from a formula, not a lender's whim. It equals a published index, typically SOFR, plus a fixed margin set in your note. Caps written into the loan limit the movement. A typical cap structure is 2/1/5 or 5/1/5, meaning the rate can move at most 2 or 5 points at the first adjustment, at most 1 point at each later adjustment, and at most 5 points above the starting rate over the life of the loan. Your payment is recalculated at each adjustment to pay off the remaining balance on schedule.

Because the lender is not locking a rate for 30 years, the starting rate is usually below a 30 year fixed, and the payment is lower with it. That is the whole appeal: a cheaper first several years for someone who does not plan to be in the loan when it adjusts. Most CPF borrowers who choose an ARM sell, pay it off or refinance to a fixed rate before or around the first adjustment. If you stay and rates have risen, your payment rises too, within the caps, so the loan only makes sense if you could handle that.

Is it right for you?

A good fit if

  • You expect to sell or refinance within the fixed period, whether that is 5, 7 or 10 years
  • You want the lowest payment for the first several years, for example while a career or a business is still growing
  • You are buying a starter home or a home you know is not your forever home
  • You could absorb a higher payment later if it came to that, and you would rather bank the savings now

Look at something else if

  • You plan to stay in the home for the long haul and want a payment that never changes (30 year fixed)
  • You want to pay the house off quickly and a higher fixed payment fits your budget (15 year fixed)
  • Your credit or down payment falls short of conventional guidelines (FHA)
  • You have served in the military (VA), or the home is in an eligible rural area (USDA)

What it takes to qualify

A conventional ARM follows the same broad guidelines as a fixed-rate conventional loan, with one twist: you are qualified on a rate that assumes the loan could adjust upward, not just the starting rate.

Down payment
Typically 5%. Gift funds from family are allowed, and down payment assistance can be layered in some cases.
Credit score
Conventional loans generally start around 620. Higher scores earn a better starting rate and lower mortgage insurance; scores in the mid-700s and above get the best pricing.
Debt-to-income ratio
Your total monthly debts, including the new payment, generally need to stay under about 45% of gross monthly income. For ARMs with shorter fixed periods, lenders typically qualify you at a rate above the starting rate to make sure you could handle an adjustment.
Loan amount
Up to the conforming limit, $832,750 in most counties for 2026. Above that, see jumbo loans, where ARMs are especially common.
Mortgage insurance
Required when you put down less than 20%. It is a monthly charge that drops off automatically once you reach 22% equity, or on request at 20%.
Property
Primary homes, second homes and investment property, including single-family homes, townhomes, warrantable condos and 2 to 4 unit properties.

Guidelines are the program's typical requirements, not a commitment to lend. Your loan officer will tell you exactly what applies to your file.

How it compares

The programs people weigh against a ARM loan most often.

Loan Minimum down Rate Term Mortgage insurance Best for
ARM This page 5% is typical Fixed for an intro period, then adjusts 30 years, with a 5-, 7- or 10-year fixed period Until you reach 20% equity A lower rate for the first several years when you expect to move or refinance before it adjusts.
30-year fixed Conventional As little as 3%; 5% is typical Fixed for the life of the loan 30 years Until you reach 20% equity The lowest fixed monthly payment, and the loan most first-time buyers start with.
15-year fixed Conventional As little as 3%; 5% is typical Fixed, usually lower than a 30-year 15 years Until you reach 20% equity Owning your home outright in half the time, if the higher payment fits your budget.
FHA Government-backed 3.5% minimum Fixed or adjustable 15 or 30 years Upfront and monthly premium Buyers with a smaller down payment, a lighter credit history or more debt than a conventional loan allows.

Compare all eight programs

Getting started

Three steps, and the underwriters, processors and closers all sit in the same office as your loan officer.

  1. Tell us about the home and your goals

    Five minutes online or by phone. No credit pull is needed for a first estimate.

  2. See the numbers side by side

    A loan officer prices a ARM loan against the closest alternatives so you can compare payment, cash to close and total cost.

  3. Get pre-approved and close

    We verify income, assets and credit, issue your pre-approval letter, and our in-house team takes it through closing.

Get pre-qualified See the full process

Adjustable or fixed? Two minutes on how to decide

The right answer depends almost entirely on how long you expect to keep the loan. This short video walks through the trade-off so you can tell which side of it you are on.

Read the article

ARM loan questions, answered

What do the numbers in 5/6, 7/6 and 10/6 mean?

The first number is how many years the rate is fixed. The second is how often it can adjust after that, in months. A 5/6 ARM is fixed for five years and then can change every six months. A 10/6 ARM is fixed for ten years. Older ARMs were written as 5/1 or 7/1, meaning they adjusted once a year.

How much can my rate go up?

Only as much as the caps in your loan allow. A typical structure is 2/1/5 or 5/1/5: the first number caps the very first adjustment, the second caps each adjustment after that, and the third caps the total increase over the life of the loan. Your loan officer will show you the worst-case payment before you commit, so there are no surprises.

Can the rate go down?

Yes. The rate is reset to the index plus your margin at each adjustment, so if the index has fallen, your rate and payment fall too. There is usually a floor, and the rate will not drop below the margin itself.

What if I still have the loan when the fixed period ends?

You have options. You can keep the loan and let it adjust, which is fine if rates are similar or lower. You can refinance into a 30 year or 15 year fixed to lock a rate again. Or you can sell. Most homeowners who reach the end of the fixed period refinance, and there is no penalty for doing so.

Is an ARM riskier than a fixed-rate mortgage?

It carries a risk a fixed loan does not: your payment can rise. Caps limit how far, and a longer fixed period pushes the risk further out. An ARM is a sound choice when you are confident you will move or refinance before it adjusts, or when you could comfortably afford the capped worst case. It is the wrong choice if a higher payment would strain you.

How is an ARM different from a 15 year or 30 year fixed?

A fixed loan trades a slightly higher rate for a payment that never changes. A 30 year fixed has the lowest fixed payment; a 15 year fixed has a lower rate and a higher payment but is paid off in half the time. An ARM usually has the lowest starting payment of the three, but only the first 5, 7 or 10 years are guaranteed. Match the loan to how long you expect to keep it.

Further reading

Other loan programs

Talk to a loan officer about a ARM loan

Tell us what you are trying to do and we will come back with real numbers: rate, payment, cash to close and how this loan stacks up against the alternatives. No obligation, and no credit pull until you ask for one.

CPF Mortgage
10710 FL-54 c101
Trinity, FL 34655
(727) 226-1040

Licensed mortgage lender and broker in Florida, Tennessee, Georgia and Colorado. NMLS 222883.

Name
NEXT