When Does an ARM Make More Sense Than a 30-Year Fixed?
Homebuyers today often face a big decision: stick with the tried-and-true 30-year fixed loan or choose an adjustable-rate mortgage (ARM). Knowing when an ARM makes more sense than a 30-year fixed mortgage can help you save money, boost buying power, and make a smarter long-term plan.
How an ARM Works:
An ARM starts with a fixed interest rate for a set period — usually five, seven, or ten years. After that, the rate adjusts at regular intervals (often every six or twelve months) based on market conditions. The initial fixed rate is almost always lower than the rate on a 30-year fixed mortgage.
For example, a 7/6 ARM keeps your payment stable for seven years, then adjusts every six months. This lower starting rate can reduce your monthly payment and total interest during the fixed period.
Times an ARM Can Be the Smarter Move:
- You’ll sell or refinance soon. If you know you’ll move or refinance before the fixed period ends, the lower initial rate can mean big savings.
- You need more buying power today. A lower starting rate can help you qualify for a higher loan amount or keep your payment affordable.
- Your income will grow. If you expect better cash flow or salary increases, an ARM lets you save early and handle possible payment changes later.
- You’re comfortable with some risk. Rates can rise after the fixed period, so you should feel confident you could afford a higher payment if needed.
Times a 30-Year Fixed May Be Better:
If you plan to stay in the home long-term or you want total payment stability, the 30-year fixed is safer. It’s also a better fit if your budget is tight and can’t handle future rate increases.
Bottom Line:
Choosing between an ARM and a 30-year fixed isn’t one-size-fits-all. An ARM can be a smart way to save early or afford more house if you plan to move or refinance before the rate adjusts. But if you value long-term stability, the 30-year fixed will keep your payments predictable.
At Houzd Mortgage, we can run side-by-side payment scenarios and help you decide which option fits your goals.
Written by Anthony VanDyke, Utah Mortgage Broker — NMLS #247102 — President at Houzd Mortgage in Draper, Utah.
A mortgage broker since 2006, Anthony has helped thousands of Utah families build a stronger financial future, one home at a time. He believes a mortgage isn’t just a loan — it’s a long-term financial strategy that can shape a family’s wealth and peace of mind.
👉 See what you qualify for with Anthony’s Purchase Qualifier Tool.