Pros and cons of an adjustable-rate mortgage (ARM) (2024)

If you're looking to finance a home purchase, you've probably seen options for adjustable-rate mortgages (ARMs).

ARMs are a popular choice, especially for borrowers hoping mortgage rates will go down. Their interest rate is fixed for an initial period and then fluctuates at set intervals for the remainder of the term.

Here's what to know about ARMs, including how they work, their pros and cons and the best lenders for these kinds of loans.

An adjustable-rate mortgage (ARM) has a rate that fluctuates over set intervals.

During the initial repayment period, which is typically between five and ten years, your rate will stay the same. It will probably be lower than the rate you'd get with a fixed-rate mortgage.

The trade-off, however, is that once the introductory phase ends, your rate adjusts every six or 12 months for the remainder of your term. Those rate changes are tied to market fluctuations, so if there's a drop in the benchmark index your lender selects when your ARM resets, your rate will go down. If there's an increase in that benchmark, however, that rate will go up.

Your mortgage offer will detail your initial interest rate and the frequency of rate fluctuations. After closing, the only way to change these terms is to refinance to another ARM or to a fixed-rate mortgage.

Pro tip: Adjustable-rate mortgages are listed as fractions

Most lenders offer ARMs, but we've selected three of the best options based on affordability, ease of applying, customer satisfaction, unique benefits and other factors.

Best customer service: Rocket Mortgage

Rocket Mortgage ranked second in J.D. Power's 2024 U.S. Mortgage Origination Satisfaction Study and has an A+ from the Better Business Bureau, making it a top pick for customer satisifaction. It routinely makes our best mortgage lenders lists, including best for first-time buyers, best online lenders, and best for a low down payment.

The largest mortgage originator in the U.S., Rocket offers ARMs with 7/6 and 10/6 terms, and borrowers can also apply for adjustable-rate FHA, VA and jumbo loans.

Best for in-person experience: Chase Bank

Best for military and veterans: First Federal Bank

Kansas-based First Federal Bank doesn't charge lender fees on VA loans, which can normally be as much as 6% of your loan total, and received an A+ from the Better Business Bureau

First Federal offers ARMs in terms of 3/1, 5/1, 7/1 and 10/1. Down payment assistance grants are available to Floridians in select areas, but mortgages are available nationwide.

The benefits and drawbacks of an ARM

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