Fixed vs. adjustable

Reading an ARM name

A 7/6 ARM is fixed for 7 years, then adjusts every 6 months. The new rate equals an index, usually SOFR, plus a fixed margin. Caps limit how much it can rise at the first adjustment, at each later one, and over the life of the loan.

When an ARM can make sense

• You expect to sell or refinance before the fixed period ends
• The initial rate is meaningfully lower than the fixed rate
• You can afford the payment at the lifetime cap, not just today's rate

When to stay fixed

If this is a long-term home and the budget is tight, the certainty of a fixed payment is usually worth more than the initial savings.

Reviewed by Mustafa Temiz, CPA, NMLS #2450795 · Updated November 2026