With mortgage rates continuing to put pressure on buyers' budgets, more home shoppers are exploring alternatives to the traditional 30-year fixed-rate mortgage. One option gaining attention is the adjustable-rate mortgage, commonly known as an ARM.
According to a November 4, 2026 report from Homes.com, adjustable-rate mortgages accounted for 11.4% of all mortgage applications during the latest reported week. That's the highest share since September 2025.
The increase comes as buyers look for ways to secure a lower initial interest rate and make monthly payments more manageable. But while an ARM can offer some short-term savings, it also comes with risks that are important to understand before signing on the dotted line.
Let's break down what an adjustable-rate mortgage is, why demand is increasing, and what buyers should consider.
What Is an Adjustable-Rate Mortgage?
An adjustable-rate mortgage is a home loan with an interest rate that can change over time.
Unlike a traditional fixed-rate mortgage, where your interest rate stays the same throughout the loan term, an ARM typically begins with a fixed introductory period. During that time, the interest rate generally remains unchanged.
After the introductory period ends, the rate can adjust periodically based on a specific financial index, plus a margin established by the lender.
You may see ARMs advertised as:
5/1 ARM: The initial interest rate stays fixed for five years, then adjusts annually.
7/1 ARM: The initial interest rate stays fixed for seven years, then adjusts annually.
10/1 ARM: The initial interest rate stays fixed for ten years, then adjusts annually.
For example, someone choosing a 7/1 ARM would generally have a fixed interest rate for the first seven years. After that, the rate could increase or decrease depending on the terms of the loan and market conditions.
The important thing to remember is that the introductory rate is not necessarily the rate you'll have for the entire time you own the home.
Why Are More Buyers Choosing ARMs?
The biggest attraction is the potential for a lower initial interest rate.
Homes.com reported that mortgage rates had recently eased to their lowest weekly average since late September, but the average 30-year fixed mortgage rate remained above 7%.
For buyers trying to stay within a certain monthly budget, even a small difference in interest rates can make a meaningful impact.
An ARM may offer:
A lower initial interest rate than some fixed-rate loan options.
Lower monthly principal and interest payments during the introductory period.
More flexibility for buyers who don't plan to own the home long-term.
An opportunity to take advantage of a lower starting rate while evaluating future plans.
It's also worth noting that overall mortgage application activity declined 1.2% during the week highlighted in the report. Purchase applications fell 2%, while refinance applications remained nearly unchanged.
In other words, buyers are still navigating affordability challenges, and some are looking at different loan structures to make the numbers work.
The Risks of an Adjustable-Rate Mortgage
A lower starting payment can be appealing, but it's important to look beyond the introductory period.
Once the fixed period ends, your interest rate can adjust. If rates are higher at that time, your monthly mortgage payment could increase.
Here are a few things buyers need to understand:
1. Your payment could increase.
If interest rates rise before your first adjustment, your mortgage payment could become significantly higher. Buyers need to make sure they could comfortably afford that possibility.
2. Future rates are unpredictable.
You cannot know exactly what interest rates will look like five, seven, or ten years from now. An ARM may start with a lower rate, but there is no guarantee that it will remain the more affordable option.
3. Refinancing isn't guaranteed.
Some buyers choose an ARM assuming they will refinance into a fixed-rate mortgage before the adjustment period begins. That may be an option, but it isn't guaranteed. Your financial situation, home value, credit profile, and mortgage rates at that time will all matter.
4. You need to understand the adjustment limits.
Most ARMs include caps that limit how much the interest rate can increase at the first adjustment, at subsequent adjustments, and over the life of the loan. These details can make a significant difference in how much your payment could change.
Before choosing an ARM, ask your lender to show you the highest possible payment under the loan's terms—not just the introductory payment.
Who Might Benefit From an ARM?
An adjustable-rate mortgage isn't automatically a bad option. It simply requires a little more planning.
It may be worth exploring for buyers who:
Expect to move before the introductory fixed period ends.
Anticipate a significant increase in household income.
Have a clear financial plan for the possibility of higher payments.
Understand the loan's adjustment schedule, caps, and long-term costs.
For example, someone purchasing a home with plans to relocate in five years might want to compare a 5/1 ARM against a traditional fixed-rate mortgage.
However, plans can change. A job opportunity, family circumstances, or changes in the housing market could mean staying in the home longer than expected.
The best loan is one that works for your finances even if your original timeline changes.
ARM vs. Fixed-Rate Mortgage: What's the Difference?
FeatureAdjustable-Rate MortgageFixed-Rate MortgageInitial interest rateOften lowerMay be higherPayment stabilityCan change after introductory periodPrincipal and interest stay consistentLong-term predictabilityLess predictableMore predictableBest suited forBuyers comfortable with future rate changesBuyers who value payment stability
Neither option is automatically better. The right choice depends on your financial situation, how long you plan to own the home, and how comfortable you are with potential payment changes.
Also, remember that property taxes, homeowners insurance, and HOA fees can change over time regardless of which mortgage type you choose.
What Does This Mean for Buyers in Concord and the Greater Charlotte Area?
For buyers in Concord, Kannapolis, Harrisburg, Huntersville, and the greater Charlotte area, the growing interest in ARMs is another reminder that there is more than one way to approach home financing.
If you've been waiting for mortgage rates to drop before purchasing, it may be worth having a conversation with a lender about the options currently available.
That doesn't mean you should choose an adjustable-rate mortgage simply because the initial payment looks better. It means understanding all of your options before deciding what makes the most financial sense.
A few questions worth asking your lender include:
How does the initial ARM rate compare with a fixed-rate mortgage?
How long does the introductory rate last?
What index and margin determine future adjustments?
What are the initial, periodic, and lifetime rate caps?
What would my payment look like if the interest rate reached its maximum?
What would refinancing involve if I decide to pursue it later?
Getting those answers upfront can help you avoid surprises down the road.
The Bottom Line
The increase in adjustable-rate mortgage applications shows that buyers are looking for creative ways to navigate today's borrowing costs.
An ARM can offer a lower initial payment, but that savings comes with the possibility of future rate and payment increases. It's important to compare the full loan terms, understand the risks, and make sure the mortgage fits your long-term financial picture.
You don't have to figure it all out on your own. A knowledgeable lender can walk you through the numbers, and having a real estate agent who understands your goals can help you evaluate the bigger picture.
Thinking about buying a home in Concord or the greater Charlotte area? Let's talk about your plans, your budget, and how to make your next move with confidence.
