Get a below-market interest rate for the first 5-10 years

 An adjustable rate mortgage is ideal for

• First-time home buyers or refinancers who need a significantly lower rate for the first 5-10 years, especially if they plan on selling the home before that time period is up.
   
• Home buyers or refinancers requiring a jumbo loan. Because they may save thousands of dollars during the fixed rate term, often their wealth management strategists will recommend an ARM.

Typically you're saving at least one percentage point - and often more - with an ARM.
 

Here's how they work:
Adjustable rate mortgages (ARMs) have a fixed rate for a certain term of years (often 5-10) before they become variable, rising or falling, depending on interest rates current at that time. As your loan's rate changes, so does your monthly payment, possibly increasing or shrinking by hundreds of dollars. Usually you'll receive the lowest rate  for the shortest fixed term (usually a five-year fixed term that converts to a variable rate, called a 5/1 ARM); the longer your fixed rate period (up to 10 years), the higher your initial rate will be.

A recent Wall Street Journal article  quoted an example where a borrower with a 5/1 ARM at 2.82% would save over $90,000 in interest during the first five years of the $1.5 million loan, vs. a borrower with a 4.06% 30-year fixed rate loan.

As with any type of loan, there are benefits and risks with an ARM.
Check with your loan consultant to see if an ARM may be right for you.