If you're a homebuyer comfortable with some unpredictability in return for a potentially lower interest rate, an adjustable-rate mortgage could be a suitable option. These are excellent choices for individuals buying a home with the intention of renting it out or reselling it, or for those who anticipate relocating prior to the conclusion of the loan's initial fixed-rate term.
TL;DR
- Adjustable-rate mortgages (ARMs) offer potentially lower initial rates but carry risk of future rate increases.
- ARMs suit buyers planning to sell or move before the initial fixed period ends, or investors.
- As of November 5, 2025, lenders like Bank of America, U.S. Bank, and Zillow Home Loans offered 7/6 ARM rates.
- ARMs are tied to benchmark indices like SOFR, plus lender margins, and have rate caps.
We'll explain how ARMs function, discuss situations where they might be preferable to the more prevalent fixed-rate mortgage, and examine ARM interest rates from several leading lenders.
You can see the previous business day’s ARM rates report here.
Top lenders' ARM mortgage rates
As of November, Fortune examined the latest available figures. Four. The institutions have supplied these sample rates. Every option is formulated based on particular assumptions regarding a hypothetical borrower's creditworthiness and geographic area. Estimates might factor in the cost of mortgage discount points. If you decide to apply, be aware that the compensation you get might differ from the sample rates presented.
| Bank of America 7/6 ARM | U.S. Bank 7/6 ARM | Zillow Home Loans 7/6 ARM | |
|---|---|---|---|
| Interest Rate | 5.750% | 6.000% | 6.125% |
| APR | 6.564% | 6.642% | 6.732% |
| Interest Rate | |
|---|---|
| Bank of America 7/6 ARM | 5.750% |
| U.S. Bank 7/6 ARM | 6.000% |
| Zillow Home Loans 7/6 ARM | 6.125% |
| APR | |
| Bank of America 7/6 ARM | 6.564% |
| U.S. Bank 7/6 ARM | 6.642% |
| Zillow Home Loans 7/6 ARM | 6.732% |
A 7/6 ARM features a fixed interest rate for the initial seven years, followed by adjustments every six months thereafter.
Fixed-rate versus adjustable-rate mortgages
Approximately 92% of all mortgages in the U.S. Are fixed-rate home loans. Families. A fixed-rate mortgage ensures your interest rate remains constant throughout the loan's duration, unlike adjustable-rate mortgages (ARMs) where rates may fluctuate after an initial fixed period. Their uniformity makes them highly attractive.
There are instances where ARMs could be a viable option. Approximately 8% of individuals opt for these loans due to perceived distinct benefits.
When an ARM might suit you
Three types of buyers often find ARMs beneficial:
- Starter home buyers: If you plan to move within a few years, an ARM may let you capitalize on a low initial rate without having to worry about future adjustments, as you intend to sell the home before the fixed period ends.
- Investors: Real estate investors who intend to flip a house or rent it out may use ARMs to minimize upfront costs, then sell the property or adjust the rent amount when rates change.
- Buyers facing high-interest markets: During periods of elevated interest rates, ARMs might offer lower upfront costs and may even provide relief later if market conditions improve.
Adjustable-rate mortgages (ARMs) are a type of home loan where the interest rate can change over time.
Adjustable-rate mortgages (ARMs) generally offer a low, fixed interest rate for a set duration, commonly three, five, seven, or ten years, before the rate begins to fluctuate. The elements influencing ARM rates during adjustments are:
- Benchmark indices: ARM rates are often tied to benchmarks like the SOFR. Each day, the U.S. Treasury publishes an updated SOFR reflects the overnight borrowing expenses banks incur for cash.
- Margins: Lenders add margins (fixed percentages) to benchmarks when calculating your ARM’s final rate. These can often range from 2% to 3.5%.
- Caps: Rate caps limit increases during specific intervals or throughout the loan term (e.g., initial adjustment caps, subsequent caps).
Typically, ARMs are structured as 30-year mortgages. Common ARM structures are 5/1 and 10/6, which signify a fixed interest rate for five years followed by yearly adjustments, and a fixed rate for ten years with adjustments every six months, respectively. Additionally, there are ARMs with terms of 3/1, 7/1, and 10/1.
Learn more: How the Secured Overnight Financing Rate could impact your mortgage.
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Switching from an adjustable-rate mortgage to a fixed-rate loan
If your plans change, you can likely decide to refinance into a fixed-rate mortgage. For example, if you decide to remain at your residence for a duration exceeding your initial expectation.
Many Millennial and Gen Z homeowners are in a similar predicament, unable to afford upgrades and facing getting by with their starter homes.
Similar to how one might refinance from one fixed-rate mortgage to another, typically to secure a more favorable interest rate or access home equity, transitioning from an adjustable-rate mortgage (ARM) to a fixed-rate loan requires comparing offers from various financial institutions and submitting Documentation to demonstrate compliance with their stipulations, and settling your outstanding mortgage balance.
Advantages and disadvantages of variable-rate home loans
Before you apply for an ARM, it's important to consider its advantages and disadvantages. Collaborating with a dependable loan officer can assist you in ascertaining if this particular loan type is indeed suitable for your needs. Here's a rundown of fundamental points.
Pros
- Chance for a lower rate at first. During the fixed introductory period, you may find an ARM offers you a lower rate than you could get on a fixed-rate mortgage.
- Potential for easier qualification. Some borrowers may find they’re more likely to qualify for an adjustable-rate mortgage than for a fixed-rate loan.
- Possible savings down the road. This is not guaranteed, but if market rates decrease during adjustment periods, your monthly payment might go down accordingly.
Cons
- Possibility for payments to rise. Remember, adjustment periods are dependent on what’s happening with the market. Your rate and consequently your monthly payment might increase, just as they have the potential to decrease.
- Hard to comparison shop. Complex terms can make comparison shopping for a good rate on an ARM more difficult than with common fixed-rate mortgage types.
- Less predictability. Once you take out a fixed-rate mortgage, you’re locked into that rate as long as you have the loan. This offers greater stability for your monthly payments, although adjustments to factors like homeowners insurance or HOA fees might still occur. Adjustable-rate mortgages (ARMs) require a specific degree of comfort with risk.