Adjustable rate mortgage loans
An adjustable rate mortgage, often called an ARM, is a home loan with an interest rate that may change over time. An ARM typically starts with an initial fixed-rate period, followed by scheduled adjustments based on market conditions and the terms of your loan.
What is an adjustable rate mortgage?
An adjustable rate mortgage is a mortgage loan with an interest rate that may change after an initial fixed-rate period. During the initial period, your rate stays the same. After that, your rate may adjust at set intervals based on the loan index, margin, and rate caps.
Unlike a fixed-rate mortgage, where the interest rate remains the same for the life of the loan, an ARM can move up or down after the initial fixed-rate period. That means your monthly payment may change over time.
How an ARM loan works
Most adjustable rate mortgages have two main phases: an initial fixed-rate period and an adjustment period. During the initial fixed-rate period, your interest rate remains the same. After that period ends, your rate may adjust at scheduled intervals based on your loan terms.
Your adjusted rate is generally based on a market index plus a margin set by the lender. Many ARMs also include rate caps that limit how much the rate can increase or decrease at each adjustment and over the life of the loan.
How an ARM loan works
Most adjustable rate mortgages have two main phases: an initial fixed-rate period and an adjustment period. During the initial fixed-rate period, your interest rate remains the same. After that period ends, your rate may adjust at scheduled intervals based on your loan terms.
Your adjusted rate is generally based on a market index plus a margin set by the lender. Many ARMs also include rate caps that limit how much the rate can increase or decrease at each adjustment and over the life of the loan.
ARM vs. Fixed-Rate Mortgage
When an adjustable rate mortgage may make sense
An ARM may be worth considering if you plan to move before the initial fixed-rate period ends, expect to refinance before the rate adjusts, want to compare initial payment options across mortgage types, and understand that your payment may increase after the fixed-rate period.
What to consider before choosing an ARM
Before applying for an adjustable rate mortgage, make sure you understand how long the initial fixed-rate period lasts, how often the rate can adjust afterward, what index and margin apply, how rate caps work, how high your monthly payment could go, and whether your budget could support the highest allowed payment.
ARM vs. fixed-rate mortgage
An ARM can be a fit for borrowers who want to compare initial payment options and understand that future payments may change. A fixed-rate mortgage can be a fit for borrowers who want principal and interest payment consistency over the life of the loan.
Features & Benefits
Every homebuyer's situation is different. If you value predictable monthly payments, a fixed-rate mortgage offers long-term stability and peace of mind. If you expect your needs to change over time, an adjustable-rate mortgage may provide a lower initial rate and payment, giving you more flexibility and room in your budget.
Features & Benefits
Every homebuyer's situation is different. If you value predictable monthly payments, a fixed-rate mortgage offers long-term stability and peace of mind. If you expect your needs to change over time, an adjustable-rate mortgage may provide a lower initial rate and payment, giving you more flexibility and room in your budget.
Feature
Interest Rate
Monthly Payment
Potential Fit
Key Consideration
Adjustable Rate Mortgage
May change after the initial fixed-rate period
May increase or decrease after adjustment periods begin
Borrowers who may move, refinance, or expect changing financial needs
Payments may change if rates adjust
Fixed-Rate Mortgage
Stays the same for the life of the loan
Principal and interest payment stays consistent
Borrowers who prefer long-term payment predictability
Initial rate may be higher than some ARM introductory rates
| Feature | Adjustable Rate Mortgage | Fixed-Rate Mortgage |
| Interest rate | May change after the initial fixed-rate period | Stays the same for the life of the loan |
| Monthly payment | May increase or decrease after adjustment periods begin | Principal and interest payment stays consistent |
| Potential fit | Borrowers who may move, refinance, or expect changing financial needs | Borrowers who prefer long-term payment predictability |
| Key consideration | Payments may change if rates adjust | Initial rate may be higher than some ARM introductory rates |
I have an ARM and my fixed rate is expiring
If your Adjustable Rate Mortgage (ARM) is approaching the end of its fixed rate period, it's normal to have questions about what comes next. As your loan transitions to an adjustable rate, your interest rate and monthly payment may change based on market conditions and the terms of your mortgage. Understanding your options can help you make informed decisions and avoid surprises later.
What do I need to know?
When your fixed rate period ends, your mortgage will begin adjusting according to the terms outlined in your loan agreement. Your new interest rate is typically based on a market index plus a margin, and adjustments may occur periodically thereafter.
Before your adjustment date, you'll receive information about your upcoming rate and payment changes. Taking time to review your mortgage details and understand how your payment may be affected can help you plan with confidence.
What options or next steps should I take?
Every homeowner's situation is different. Depending on your financial goals, you may want to:
- Review your mortgage terms and upcoming adjustment schedule
- Estimate how your monthly payment may change
- Explore refinancing options that could provide more payment stability or help you meet other financial goals
- Speak with a M&T Bank Mortgage Loan Officer to discuss the solutions that may be right for you
The earlier you begin reviewing your options, the more flexibility you'll have to make the best decision for your needs.
Ready to talk?
Connect with us to review your ARM and discuss potential next steps before your rate adjusts.
Frequently Asked Questions
An adjustable rate mortgage, or ARM, is a home loan with an interest rate that may change after an initial fixed-rate period. When the rate adjusts, your monthly payment may change based on your loan terms.
An ARM usually starts with a fixed interest rate for a set period. After that period ends, the rate may adjust at scheduled intervals based on an index, margin, and rate caps.
With a fixed-rate mortgage, the interest rate stays the same for the life of the loan. With an ARM, the interest rate may change after the initial fixed-rate period.
Yes. Your monthly payment may increase if your interest rate adjusts upward after the initial fixed-rate period. Review the loan adjustment schedule and rate caps before choosing an ARM.
Rate caps limit how much your ARM interest rate can change. Caps may apply to the first adjustment, later adjustments, and the total rate change over the life of the loan.
The first number generally refers to the number of years the initial interest rate stays fixed. The second number generally refers to how often the rate may adjust after that fixed period.
understand how your payment could change after that period.
Review the initial fixed-rate period, adjustment frequency, index, margin, rate caps, estimated payment changes, and whether your budget could support a higher monthly payment.
You may be able to refinance an ARM, depending on your financial situation, home value, credit profile, loan requirements, and market conditions at the time you apply.
Use M&T Bank approved mortgage application paths or connect with a mortgage loan officer to review available mortgage options.
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