What is an Adjustable Rate Mortgage?

October 27, 2025•1 min read

What is an Adjustable Rate Mortgage (ARM?)

An ARM is a home loan with an interest rate that is fixed for an initial period and then adjusts periodically based on the market.

Key Features

Initial Fixed Rate:The loan starts with an introductory rate that is typically lower than a fixed-rate mortgage. This period usually lasts 3, 5, 7, or 10 years (e.g., a 5/1 ARM is fixed for 5 years).
Rate Adjustments:After the fixed period, the rate adjusts periodically (e.g., annually) using a formula: Index + Margin = Your New Rate
Rate Caps:Crucially, ARMs have safeguards (caps) that limit how much the interest rate can increase both during each adjustment period and over the lifetime of the loan, protecting the borrower from unlimited increases.

The Ideal Client

An ARM is a smart choice for a buyer who:

Plans to move or refinance before the initial fixed-rate period ends. They benefit from the lower initial payments without facing the risk of the rate adjusting.
Anticipates an increase in income in the coming years and will be better positioned to afford potentially higher payments later on.
Needs a lower initial payment to maximize their purchasing power in the short term.

Jennifer Blau

Jen brings a wealth of experience from the financial services industry, starting as a Certified Financial Planner and later earning her MBA in Finance from Duke University. After working in Corporate Bond Sales and raising three daughters, she joined Team Pogue Real Estate, where she’s spent over a decade building community relationships. With a deep understanding of both finance and family life, Jen offers a personalized, thoughtful approach as a mortgage loan originator—committed to helping families find the right path to financial stability and homeownership.

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