# Adjustable-rate mortgage (ARM)

> An adjustable-rate mortgage has a rate fixed for a few years, then resets with an index plus a margin, within caps. How ARM names work, with an example.

URL: https://mail.mortgage-math-us.com/glossary/adjustable-rate-mortgage/  
Last reviewed: 2026-10-29 · By the MortgageMath US Editorial team

## Quick answer

**An adjustable-rate mortgage (ARM)** is a home loan whose interest rate can change. Most ARMs keep an introductory rate for several years, then reset at set intervals to an [index](https://mail.mortgage-math-us.com/glossary/arm-index/) plus a [margin](https://mail.mortgage-math-us.com/glossary/arm-margin/), limited by [rate caps](https://mail.mortgage-math-us.com/glossary/rate-caps/).

## Key facts

| Fact | Value | Source | As of |
|---|---|---|---|
| Index on Fannie Mae ARMs | 30-day average SOFR | [Fannie Mae Selling Guide B2-1.4-02](https://selling-guide.fanniemae.com/sel/b2-1.4-02/adjustable-rate-mortgages-arms) | Dec 10, 2025 |
| Caps on a 5/6 ARM (first/periodic/lifetime) | 2/1/5 | [Fannie Mae Standard ARM Plan Matrix](https://singlefamily.fanniemae.com/media/6951/display) | Oct 1, 2021 |
| Caps on 7/6 and 10/6 ARMs | 5/1/5 | [Fannie Mae Standard ARM Plan Matrix](https://singlefamily.fanniemae.com/media/6951/display) | Oct 1, 2021 |

## Reading names like 5/6 and 7/6

The first number is how many years the starting rate lasts; the second is how often it adjusts afterwards. A 5/6 ARM is fixed for five years and then changes every six months. Fannie Mae’s standard ARMs use the 30-day average SOFR as the index, with caps of 2/1/5 on a 5/6 and 5/1/5 on 7/6 and 10/6 loans.

## Example: the first reset

Say a $300,000 5/6 ARM starts at an example rate of 6.5%. The payment is $1,896 for five years, after which $280,833 is still owed. If rates have climbed, the first adjustment can add up to 2 percentage points, taking the rate to 8.5% and the payment to $2,261. The lifetime cap means the rate can never pass 11.5%.

Rates can fall too, but plan for the worst case. The [fixed vs adjustable guide](https://mail.mortgage-math-us.com/loan-types/fixed-vs-adjustable-rate/) and [ARM risks explained](https://mail.mortgage-math-us.com/blog/arm-risks-explained/) show when an ARM can make sense compared with a [fixed-rate mortgage](https://mail.mortgage-math-us.com/glossary/fixed-rate-mortgage/).

## Sources

- [Fannie Mae Standard ARM Plan Matrix](https://singlefamily.fanniemae.com/media/6951/display) — Rate caps on a Fannie Mae 5/6 ARM (first/periodic/lifetime); Rate caps on Fannie Mae 7/6 and 10/6 ARMs (first/periodic/lifetime) (Oct 1, 2021)
- [Fannie Mae Selling Guide B2-1.4-02](https://selling-guide.fanniemae.com/sel/b2-1.4-02/adjustable-rate-mortgages-arms) — Index on Fannie Mae ARMs (Dec 10, 2025)
- [CFPB: What is the difference between a fixed-rate and adjustable-rate mortgage (ARM) loan?](https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-fixed-rate-and-adjustable-rate-mortgage-arm-loan-en-100/)
- [CFPB: Consumer Handbook on Adjustable-Rate Mortgages (CHARM booklet)](https://files.consumerfinance.gov/f/documents/cfpb_charm_booklet.pdf)

_General information, not financial advice._