Neither wins every time. The decision starts with your holding period, not a rate forecast.

A fixed-rate loan holds the same rate for the life of the loan. Your first payment matches your last. An ARM opens with a lower rate locked for a set number of years, then adjusts on a schedule once that period ends.

The numbers in an ARM's name describe exactly that. A 5/6 is fixed for five years, then adjusts every six months. A 7/6 is fixed for seven, a 10/6 for ten. The longer that first number, the more stability you get — and the smaller the initial rate advantage tends to be.

So the question is simple. Do you have a clear plan to sell or refinance before the introductory period ends? If so, an ARM lets you take the lower early rate and never face an adjustment. If you're not sure, the predictability of a fixed rate earns its keep.

Post-adjustment rates aren't set arbitrarily. They're calculated from a formula: a market index plus a fixed amount called the margin. The index rises and falls with the market, but your margin is set at closing and never changes. That makes margin worth comparing between offers — not just the opening rate.

Adjustments are also bounded by caps. There are typically three: a limit on the first adjustment, a limit on each adjustment after that, and a ceiling across the life of the loan. Knowing those three numbers lets you calculate your worst-case payment before you sign anything. If you can look at that figure and stay comfortable, an ARM is a reasonable choice. If you can't, no amount of early savings changes that.

One more thing. The gap between fixed and ARM opening rates isn't fixed — it moves daily. When the spread is wide, an ARM offers real savings. When it's thin, you're taking on adjustment risk for very little. We open the actual rate sheet with you on your lock date and walk through the worst-case payment before you decide.