Fixed-rate vs. ARM mortgage.
Predictability and peace of mind, or a lower intro rate that pays off if you don't keep the loan long? Here's how to decide.
Pick fixed if…
- Planning to stay 7+ years
- Want full payment predictability
- Rates are at or near long-term lows
- First home / first mortgage
Pick ARM if…
- Likely to sell or refinance in 5–7 years
- Jumbo loan where ARM discount is meaningful
- Rates are high today and expected to drop
- Buying a second home or short-term hold
Side-by-side comparison
| Feature | Fixed-Rate | ARM (5/6, 7/6, 10/6) |
|---|---|---|
| Rate stability | Fixed for full term (15 or 30 years) | Fixed for intro period (5, 7, or 10 yrs), then adjusts |
| Initial rate | Standard market rate | Typically 0.25–0.75% below fixed |
| Rate caps (after intro) | N/A | Typically 2/1/5 caps on a 5/6 or 7/6 ARM |
| Best for | Long-term ownership, predictability | Short-term ownership, jumbo, high-rate environments |
| Refinance flexibility | Always an option if rates drop | Can refi or sell before reset |
Colorado market context
ARMs have made a comeback in Colorado over the last few years — particularly on jumbo loans in Aspen, Vail, Telluride, and Boulder where the rate discount versus a fixed jumbo is meaningful. For buyers who plan to refinance once rates settle, or who don't expect to keep the loan more than 5–7 years, an ARM can save tens of thousands in interest during the intro period.
Fixed vs ARM FAQs
How does an ARM work?+
An adjustable-rate mortgage has a fixed intro period (commonly 5, 7, or 10 years), then adjusts every 6 months based on an index (usually SOFR) plus a margin. Caps limit how much it can move per adjustment and over the life of the loan — typical 5/6 ARM has 2/1/5 caps (first adjustment max 2%, subsequent max 1%, lifetime max 5%).
When does an ARM make sense?+
Three scenarios: (1) you're confident you'll sell or refinance within the intro period; (2) rates are high and you expect them to drop in the next few years (you can refinance into a lower fixed rate later); (3) you're using a jumbo ARM where the rate discount is meaningful.
Are ARMs risky?+
Less than they were pre-2008. Today's ARMs are fully documented, fully amortizing, and have lifetime caps. The real risk is rates being higher when your ARM resets and you haven't sold or refinanced.
What's a 5/6 vs 7/6 ARM?+
5/6 = fixed for 5 years, then adjusts every 6 months. 7/6 = fixed for 7 years, then adjusts every 6 months. 10/6 = 10 years fixed, then 6-month adjustments. Longer intro = slightly higher initial rate.
Are jumbo ARMs common in Colorado?+
Yes — especially in high-cost markets like Aspen, Vail, Telluride, and Boulder. Jumbo ARM pricing is often meaningfully lower than fixed jumbo, which is why high-end CO buyers regularly use 7/6 or 10/6 ARMs.
Quote fixed and ARM side-by-side
We'll price both for your scenario and run the break-even.