Adjustable-rate mortgages (ARMs) have long been an option for homebuyers looking to secure lower initial interest rates. But with the current state of the housing market and fluctuating rates, are ARMs still a smart move in 2025? In this blog, we’ll break down the pros and cons, compare them to fixed-rate mortgages, and explore their impact in cities across the Phoenix Metro Area.

What Is an Adjustable-Rate Mortgage?

An adjustable-rate mortgage starts with a fixed interest rate for a set period—typically 5, 7, or 10 years. After this initial phase, the rate adjusts periodically based on market conditions. This means your monthly mortgage payment can increase or decrease depending on interest rate trends.

Pros of Choosing an ARM in 2025

✅ Lower Initial Payments

One of the biggest advantages of an ARM is the lower introductory interest rate. This can be appealing for buyers in competitive markets like Scottsdale and Chandler, where home prices are on the higher end.

✅ More Buying Power

With a lower initial interest rate, borrowers may qualify for a larger loan, giving them access to homes in prime locations across the Phoenix Metro Area, including Gilbert and Tempe.

✅ Ideal for Short-Term Homeowners

If you plan to move within a few years, an ARM can save you money on interest before the rate adjusts. This is especially beneficial for investors and first-time buyers who don’t expect to stay in their home long-term.

Cons of an Adjustable-Rate Mortgage

❌ Rate Increases Can Raise Payments

Once the fixed period ends, your rate can adjust upward, leading to higher mortgage payments. Homeowners in Phoenix and Mesa should carefully assess whether they can handle potential increases.

❌ Market Uncertainty

Interest rates fluctuate based on economic conditions, and predicting future changes can be difficult. A fixed-rate mortgage offers long-term stability that some buyers may prefer, particularly in uncertain markets.

❌ Refinancing Might Be Necessary

If interest rates rise significantly, refinancing into a fixed-rate mortgage may be necessary to avoid higher payments. However, refinancing depends on your financial situation and market conditions at the time.

How ARMs Compare to Fixed-Rate Mortgages

Are ARMs a Smart Move in 2025?

Adjustable-rate mortgages can still be a smart choice for certain buyers, particularly those who:
✔️ Plan to sell or refinance before the fixed-rate period ends
✔️ Want lower monthly payments upfront to afford a home in Scottsdale, Chandler, or Phoenix
✔️ Are confident they can handle potential rate increases

However, those looking for long-term stability or who expect to stay in their home for many years may prefer the predictability of a fixed-rate mortgage.

Consult a Real Estate Expert

Choosing the right mortgage depends on your financial goals, market conditions, and future plans. If you’re considering buying or refinancing in the Phoenix Metro Area, I’m here to guide you through the process and help you make an informed decision. Contact me today to explore your options and find the best financing solution for your needs!