Mortgage programs›Jumbo loans›Jumbo loan fixed vs ARM

Fixed Rate vs. ARM — Jumbo Loans

Fixed rate vs. ARM — which is better for a jumbo loan?

Both options are available on jumbo loans. The right choice depends on how long you plan to stay, your risk tolerance, and your goals.

Get a free rate quote

Fixed-rate jumbo loans

Fixed-rate jumbo loans are available in 15- and 30-year terms. Your rate and payment stay constant for the life of the loan — providing complete payment certainty and the most popular choice for long-term buyers.

Adjustable-rate jumbo loans (ARMs)

  • 7/6 ARM: Fixed rate for the first 7 years, then adjusts every 6 months
  • 10/6 ARM: Fixed rate for the first 10 years, then adjusts every 6 months
  • Adjustment caps: 5% initial cap, 1% per adjustment, 5% lifetime cap (5/1/5)
  • Qualifying rate: Must qualify at the greater of the fully indexed rate or the note rate

Key ARM restrictions on jumbo loans

  • ARMs are not eligible on transactions above 80% LTV
  • ARMs are not available on investment properties on most programs

Which should you choose?

Your situation Consider
Planning to stay 10+ years 30-year fixed for payment certainty
Planning to sell or refinance within 7–10 years 7/6 or 10/6 ARM for potential rate savings
Putting less than 20% down Fixed rate only (ARM not available above 80% LTV)
Buying an investment property Fixed rate (ARM restricted on most programs)

Illustrative example, not a quote: on a $1.5M 30-year loan, a 0.5% rate difference (for instance 7.0% versus 6.5%) changes the monthly principal-and-interest payment by roughly $500. For buyers who know they’ll move within 10 years, the ARM math can be compelling.

Serving California homebuyers and investors — Orange County, Los Angeles, San Diego, the Inland Empire, and communities throughout Southern California including Irvine, Huntington Beach, Anaheim, Fullerton, Garden Grove, and Santa Ana.

A worked example: what an ARM changes over time

This is an illustrative example, not a quote. Take a 7/6 ARM with the 5/1/5 caps listed above. At the first adjustment the rate can rise by up to 5 percentage points over the starting rate. After that it can move by no more than 1 point at each six-month adjustment, and it can never exceed the starting rate plus 5 points. For instance, a starting rate of 5.5% could not go above 10.5% under those caps (5.5 + 5 = 10.5). The worst case is bounded, but it is far from small. On a $1,500,000 loan, a rise of several points adds thousands of dollars a month, so a borrower should be able to cope with the capped maximum, not just the starting payment.

Questions to ask before choosing an ARM

  • How long will I realistically own this home? Many California owners refinance or sell sooner than they plan; others stay far longer.
  • Could my income handle the capped maximum payment? If not, a fixed rate is the safer structure.
  • Will I want to refinance before the fixed period ends? A refinance carries its own closing costs and qualification, so do not assume it will be available when you want it.
  • What index and margin does the loan use? Together they set where the rate goes after the fixed period.

Comparing the 15-year and 30-year fixed

A 15-year fixed has a higher monthly payment but builds equity much faster and carries less total interest. A 30-year fixed keeps the payment lower, which also keeps your DTI lower. On a jumbo loan the DTI limit can decide which term you can qualify for, so we run both.

Frequently asked questions

What does the qualifying rate rule mean for me?

Underwriters qualify an ARM borrower at the greater of the fully indexed rate or the note rate. That means a low starting rate does not by itself let you borrow more.

Can I switch from an ARM to a fixed later?

You can refinance into a fixed-rate loan, but it requires a new application, appraisal and closing costs. The terms you get depend on your situation and credit at that time.

Is a 10/6 ARM much different from a 7/6?

The main difference is three more years before the first adjustment. Starting terms between the two can differ, so ask for both on your scenario.

Related guides