With rates trending down, adjustable-rate mortgages are gaining popularity again. A 5/1 ARM at 5.2% saves $180/month over a 5.87% fixed rate on a $400K loan — but carries risk if rates reverse.
Comparison on $400K Loan
- 30-year fixed at 5.87%: $2,366/month
- 5/1 ARM at 5.2%: $2,186/month
- Savings: $180/month ($10,800 over 5 years)
- Risk: rate could adjust up to 10.2% after year 5
ARMs make sense if you plan to sell or refinance within 5-7 years. If this is your forever home, the certainty of a fixed rate outweighs the savings.
