ARM vs. 30 yr fixed in 2025 on single family home

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ARM vs. 30 yr fixed in 2025 on single family home

James HolmesPro Member
Member since 2025 · 21 posts · 8 votes

I was curious to see points of view on selecting a 7/6 ARM or a 30 year fixed in today's current market. I have read up on the pros and cons but I am really looking to get the experience of people from this platform.

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Mike GrudzienPro Member
Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
1y

I concur with Andrew. You would need a significant rate advantage on an ARM.

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  • Andrew Zamboroski
    Lender · Member since 2021 · 495 posts · 130 votes
    1y
    Quote from @James Holmes:

    I was curious to see points of view on selecting a 7/6 ARM or a 30 year fixed in today's current market. I have read up on the pros and cons but I am really looking to get the experience of people from this platform.

    Unless the adjustable rate has a benefit to it (lower intro rate to make it worth it) clients of ours generally always go fixed.
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  • Mike GrudzienPro Member
    Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
    1y

    I concur with Andrew. You would need a significant rate advantage on an ARM.

    1Reply
  • Zach Wain
    Scottsdale, AZ · Member since 2019 · 435 posts · 248 votes
    1y

    @James Holmes - it has been a few years since ARM's were competitive. When the yield curve is inverted (2 yr treasury rates are higher then a 10 yr treasury bond) that usually means ARM's will not be priced better then 30 yr fixed loans. The yield curve has recently uninverted, so ARM's are starting to make a comeback. But, I think we need a little more time before they are available and attractive.

    FHA ARM's are priced well at the moment, some Jumbo products as well.

    Generally speaking, an ARM needs to fit your personal timeline for when you want to refinance or sell, and of course it must offer you some benefit with a lower rate compared to a 30 yr fixed.

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  • Deven Ziertman
    Member since 2025 · 77 posts · 15 votes
    1y

    When choosing between a 7/6 ARM and a 30-year fixed mortgage in 2025, an ARM might offer a lower initial rate, but it comes with the risk of rate adjustments after the initial period. In today's market, many lenders are still more favorable toward fixed-rate loans due to the current yield curve. If you plan to refinance or sell within a few years, an ARM could be advantageous if it offers a significant rate benefit. Otherwise, a 30-year fixed provides stability without the risk of future rate hikes.

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  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    1y

    @James Holmes As long as there’s no prepayment penalty or a short prepayment penalty on the 30yr fixed that is the route I would take.

    People have been thinking rates would drop for a while now but they haven’t and some things I’m reading indicate rates may increase due to long term situations with the treasury and the instability of this administration.

    I'd hate to see you get several years into a deal on an ARM and find out that when you have to refinance rates have increased and your underwriting is now gone to the doghouse.

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  • Margie Cindy Santos
    Lender · Member since 2025 · 19 posts · 6 votes
    1y

    Hi James, most of our clients choose with 30 year fixed over ARMs. On some programs, the ARM may have better rate (by 0.125-0.25%) but on other it may be the same. Most investors won't pick the ARM unless there's considerable rate advantages as most ARM programs are fixed for 5+ years

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  • Matthew CrivelliBusiness Member
    Lender · MA · Member since 2021 · 1k+ posts · 1k+ votes
    1y

    I have a relative who bought a primary with a 7/1 ARM in late 22. "oh we will refinance out when the rates decrease, totally not worried about it." Well here we are in 2025 and I can tell you they are starting to get nervous. We exited a 40 YEAR cycle of declining rates at the end of covid. I don't have a crystal ball, but my educated guess is rates are going to stay elevated for some time. Fixed loans are the best option.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y
    Quote from @James Holmes:

    I was curious to see points of view on selecting a 7/6 ARM or a 30 year fixed in today's current market. I have read up on the pros and cons but I am really looking to get the experience of people from this platform.


    it depends. I say that because it is going to matter how long you plan on staying in the property. if you have stable income, and plan on living their long term i would go 30year fixed, but if you plan on staying for a few years then moving up or switching locations - an ARM is not a bad choice, but it also depends on your down payment. if its a low down payment go with the fixed because if you try and refinance due to rate hikes and the equity is not there, it will be very painful.

    So TLDR version, unless you know for a fact you will be there for a short term, go ARM, otherwise go fixed.

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  • Roger Mace
    Lender · Knoxville, TN · Member since 2024 · 112 posts · 23 votes
    1y
    I agree with most of the statements about ARMs  You should only use it if it  has a significant benefit to you,  If you choose and ARM be sure you know want the floor and ceiling are.  Just because you are told it can only go up maybe 6% that doesn't mean the mortgage will be 6%.  If you're paying a 4% interest a 6% increase would be a 10% mortgage.  Make sure you read the fine print.  Take the start rate and ad the cap rate.  that will be what you can be hit with.  If you use and ARM make sure you have a viable exit strategy.
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  • Roger Mace
    Lender · Knoxville, TN · Member since 2024 · 112 posts · 23 votes
    1y
    I agree with most of the statements about ARMs  You should only use it if it  has a significant benefit to you,  If you choose and ARM be sure you know want the floor and ceiling are.  Just because you are told it can only go up maybe 6% that doesn't mean the mortgage will be 6%.  If you're paying a 4% interest a 6% increase would be a 10% mortgage.  Make sure you read the fine print.  Take the start rate and ad the cap rate.  that will be what you can be hit with.  If you use and ARM make sure you have a viable exit strategy.
    0Reply
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