Adjustable-rate mortgages in the DMV

A 5/1, 7/1, or 10/1 ARM gives you a fixed rate for a set period, then the rate adjusts based on an index plus a margin, with caps on how far it can move. The opening rate is not the life of the loan. I’ll walk through the caps with you before you treat that first rate as permanent.

ARM terms and adjustment caps

A 5/1 means five years fixed, then annual adjustments. A 7/1 and a 10/1 work the same way with longer initial periods.

Caps limit how far the rate can jump at the first adjustment, at each later adjustment, and over the life of the loan. Floors exist too. When you have a Loan Estimate, we’ll read the cap structure together so you know the real range.

When an ARM can make sense

An ARM can work if you have a firm plan to sell or refinance before the first adjustment, and the payment still works if that plan slips. It is a poor fit if the only way the house works is the opening rate staying forever.

Compare it against a 30-year fixed on the same facts. If the loan amount is large, as it often is in this area, the loan programs page covers jumbo options.

Qualification is not the start payment

Lenders may qualify you at a higher payment than the opening rate suggests, based on the fully indexed rate or the caps. A payment that looks easy on a quote can still fail the underwriting test.

If you plan to refinance before the first reset, remember that a plan to refinance later is not a guarantee. You still have to qualify when the time comes. You can see the options on the loan programs page.

Common questions

What does 5/1 ARM mean?

Five years at a fixed rate, then adjustments on the schedule in the note, with caps. Read the caps. Don’t stop at the opening rate.

Is an ARM always cheaper than a 30-year fixed?

The opening rate is often lower, but the payment after the first adjustment is not guaranteed to stay lower. We’ll look at both side by side.

Can I refinance an ARM before it adjusts?

Sometimes, if you still qualify and the costs make sense. A refinance is a new loan, and it isn’t automatic just because the calendar moved.

Related: When is refinancing worth it?

Next step

Not sure whether an ARM fits your plans? Contact me with your timeline, income, and the property, and I’ll tell you what makes sense.

— Rich Jones

Note: Rates, fees, and program guidelines change often and depend on your credit, income, and property. This post is general education, not a Loan Estimate or a commitment to lend. Contact me for numbers that fit your situation.