Over the past half-century, homebuyers would have saved money by choosing an ARM about 70% of the time, thanks to later opportunities to refinance into a lower 30-year fixed rate.
Over the last 50-plus years, it has made financial sense for homebuyers to take out an adjustable-rate mortgage (ARM) rather than a 30-year fixed rate mortgage more often than not. That’s despite borrowers’ widespread lack of familiarity with the option.
About seven in 10 U.S. homebuyers (71.6%) who take out an ARM have a chance to refinance into a 30-year fixed rate at least 0.5 percentage points lower than their original rate within five years. That means the borrower would have refinanced into a lower mortgage rate for the duration of the loan before they even reached the adjustable-rate period.