Adjustable-rate mortgages

Lower introductory rates

With an adjustable-rate mortgage (ARM), your rate and payment may change periodically.

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What is an adjustable-rate mortgage?

Adjustable-rate mortgage basics

Your interest rate is fixed for an introductory period, then adjusts periodically based on a market index used for the loan. Both the interest rate and APR may increase at the end of the initial fixed-rate period.
Your monthly payment may increase or decrease depending on whether the index goes up or down.
Adjustable-rate mortgages are available in conforming or jumbo loan amounts

Adjustable-rate mortgage benefits

Your monthly payment during the introductory period may be lower than a fixed-rate mortgage would offer.
An ARM may be a good choice if you plan to sell your home before the introductory period ends.
You may be able to refinance your ARM with a fixed-rate mortgage if you want to avoid the uncertainty of fluctuating rates in the future.

Should you get an ARM?

You might consider getting an adjustable-rate mortgage if:

You plan to move within 5 to 10 years.
You want more cash available at the start of your mortgage.
You're buying in a high-interest rate market.

Our mortgage consultants can help you decide if an ARM is right for you. Find a consultant in your area or request a call today.

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Types of adjustable-rate mortgages

ARM product names tell you how long the introductory period is, and how often the interest rate adjusts after that.

5/6-month ARM

Also called a 5-year ARM, this option has a fixed interest rate for the first five years, then adjusts every six months.

7/6-month ARM

Also called a 7-year ARM, this option has a fixed interest rate for the first seven years, then adjusts every six months.

10/6-month ARM

Also called a 10-year ARM, this option has a fixed interest rate for the first ten years, then adjusts every six months.

Talk with a home mortgage consultant about loan amount, loan type, property type, income, first-time homebuyer, and homebuyer education requirements to discuss eligibility.

FHA loans have the benefit of a low down payment, but consider all costs involved, including up-front and long-term mortgage insurance and all fees. Ask your home mortgage consultant to help you compare the overall costs of all your home financing options.

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Adjustable-rate mortgage FAQs

ARMs typically have interest rate caps that limit how much your interest rate increases. The three main types of rates caps are:

Initial adjustment cap, which curbs how much your rate can rise or fall the first time it resets
Subsequent adjustment cap, which limits how much your rate can change in relation to the previous period's rate
Lifetime adjustment cap, which puts a ceiling on how much your rate can increase over the life of the loan

Understanding this structure helps you know your worst-case rate scenario up front, so you can budget with confidence.

Qualifying for an ARM is a lot like qualifying for other mortgages. Lenders look at many of the same traits, including:

Credit score
Income and employment history
Debt-to-income ratio
Down payment

The exact requirements vary by lender and loan type.

Down payment requirements for ARMs are generally similar to fixed-rate loans. For conventional ARMs, some programs allow as little as 3% down, though many lenders require at least 5%. Again, requirements vary by lender and loan type.

Talk with a home mortgage consultant about loan amount, loan type, property type, income, first-time homebuyer, and homebuyer education requirements to discuss eligibility.

Deciding whether to choose a fixed-rate or adjustable-rate loan depends largely on your preferences and goals. If you expect to sell or refinance before the adjustable-rate kicks in, then an ARM could make more sense. But if you plan to stay in the house long term or prefer a predictable payment, a fixed-rate mortgage might be the better option.

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If you extend your loan term, you may pay more interest over the life of your loan.

If you are a service member on active duty, an eligible spouse, partner, or dependent, or currently receiving SCRA benefits, please consult with your legal advisor prior to seeking a refinance of your existing mortgage loan. In some cases, a refinance may impact your eligibility for benefits under the Servicemembers Civil Relief Act or applicable state law.

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Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A.

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