Adjustable Rate Mortgage (ARM)

An Adjustable Rate Mortgage (ARM) can be a powerful tool when you expect either your income or your asset's performance to rise over time. With an ARM, your initial interest rate is typically lower than a comparable fixed loan, which means lower payments in the early years and more flexibility for other priorities - leasing, renovations, or growth investments.

The structure is simple: you receive a fixed rate for an initial period - commonly 3, 5, 7, or 10 years - and then the rate adjusts at pre-set intervals based on a market index plus a margin. Those adjustments can move up or down, within defined caps. We walk you through the index, margins, and caps in clear terms, so you understand exactly how your payment could change and under what conditions.

ARM loans for commercial real estate can fit well when you have a clear value-add or repositioning strategy and plan to refinance or sell before the first major adjustment, or when you believe rate conditions will remain favorable and prefer the initial savings to a higher fixed rate. They can also be used to improve cash flow during a lease-up period, with the expectation of transitioning to permanent financing later.

However, flexible payment mortgage options come with risk if rates rise faster than expected. Our role is to help you assess that risk realistically. We stress-test your numbers under different rate scenarios, review covenants and adjustment mechanics, and ensure the structure is compatible with your debt service coverage requirements and contingency plans.

Rather than viewing an adjustable rate commercial mortgage as a quick discount, we position it as a strategic instrument. When selected and structured thoughtfully, an ARM can give you meaningful early savings and the agility to respond to changing market conditions, while keeping a clear path to long-term, sustainable financing.