For years, adjustable-rate mortgages—or ARMs—weren't getting much attention. They became q uite unpopular and were considered "risky" post the Mortgage meltodwn of 2008 - 2010. And then, with fixed mortgage rates at historically low levels, most borrowers had little reason to consider them.
But things have changed.
According to the Mortgage Bankers Association's October 28, 2026 report, adjustable-rate mortgages now account for 11.3% of mortgage applications, their highest share in more than a year.
Why?
Homebuyers are looking for ways to make their mortgage payments more affordable.
And depending on the loan program and borrower, an adjustable-rate mortgage may offer a lower initial interest rate than a traditional 30-year fixed mortgage.
But does that make an ARM the better choice?
Not necessarily.
How Does an Adjustable-Rate Mortgage Work?
Let's use a 7/6 ARM as an example.
The interest rate is fixed for the first seven years. After that, it can adjust every six months based on the loan's index, margin and adjustment limits.
Other common options include 5/6 and 10/6 ARMs, which provide initial fixed-rate periods of five or ten years.
The important distinction is that your rate isn't necessarily fixed for the entire 30-year loan term.
What Could the Initial Payment Difference Look Like?
Consider a hypothetical $750,000 mortgage:
| 30-Year Fixed | 7/6 ARM | |
|---|---|---|
| Interest rate | 7.00% | 6.25% |
| Monthly principal & interest | $4,990 | $4,618 |
That's approximately $372 per month in initial payment savings.
Of course, these are just illustrative rates rather than actual loan quotes. The comparison excludes taxes, insurance and other housing expenses, and doesn't account for differences in closing costs.
And remember: The ARM payment could change after the initial fixed period.
Who Might Consider an ARM?
An ARM may be worth exploring if you expect to sell or relocate before the initial fixed-rate period ends, want to compare initial payment savings, or have the financial flexibility to manage potential future increases.
But your plans can change.
You might decide to stay in the home longer than expected. Mortgage rates might not decline. And refinancing may not be available when you want it.
That's why it's important to understand the potential payment increases before committing.
What Should You Compare?
When evaluating an ARM against a fixed-rate mortgage, I want my clients to understand:
The initial interest rate and monthly payment.
How long the rate remains fixed.
The index and margin used for future adjustments.
The adjustment caps and maximum potential payment.
The total financing costs and expected length of ownership.
An ARM may be a very useful financing tool. But it needs to fit your particular situation. How long will you stay in the home? What is the future rate outlook?
My Approach: Let's Look at the Entire Picture
After more than 30 years in mortgage lending, I've learned that the best mortgage isn't always the one with the lowest initial rate.
It's the one that fits your financial circumstances, goals and tolerance for risk.
If you're considering buying a home in California, I'd be happy to compare fixed-rate and adjustable-rate financing options so you can make an informed decision.
Karen Card
Sr. Loan Officer | NMLS #235218
The Card Team | American Pacific Mortgage Corporation
714-290-6940
www.card-team.com
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