Adjustable-Rate Mortgages Are Making a Comeback. Should North Texas Buyers Consider One?

November 4, 2026 | By Tanya O'Neil, Associate Broker, The Estancia Group at Real Brokerage

Remember adjustable-rate mortgages?

If you bought a home before the 2008 housing crash—or even just watched the news back then—you probably remember hearing plenty about them.

Well, they're making a comeback.

According to the Mortgage Bankers Association (MBA), adjustable-rate mortgages recently accounted for 11.3% of all mortgage applications, their highest share in more than a year.

And while that might bring back some uncomfortable memories, today's adjustable-rate mortgages deserve a closer look.

For some North Texas buyers, they could offer meaningful savings. For others, the risks may outweigh the benefits.

The important thing is understanding the difference.

Why Are Adjustable-Rate Mortgages Becoming Popular Again?

It comes down to one thing: affordability.

Mortgage rates have made purchasing a home more expensive, even as some North Texas sellers have become more willing to negotiate.

In the MBA's October 28 report, the average contract interest rate for a 30-year fixed-rate mortgage was 7.37%. The average 5/1 adjustable-rate mortgage was 6.41%.

That's nearly a full percentage point difference.

And when you're financing a $400,000 home purchase—or a $600,000 move-up home in Argyle, Flower Mound, or Northlake—that difference can translate into hundreds of dollars each month.

Buyers are paying attention.

But a lower starting payment doesn't necessarily mean a better long-term mortgage.

What Exactly Is an Adjustable-Rate Mortgage?

An adjustable-rate mortgage, commonly called an ARM, has an interest rate that stays fixed for an initial period and then adjusts according to the terms of the loan.

For example:

• 5/1 ARM: The rate stays fixed for five years, then typically adjusts annually.

• 7/6 ARM: The rate stays fixed for seven years, then can adjust every six months.

• 10/6 ARM: The rate stays fixed for ten years, then can adjust every six months.

Once the fixed period ends, the interest rate can increase or decrease based on the loan's index, margin, and adjustment limits.

Unlike a traditional 30-year fixed-rate mortgage, your interest rate isn't guaranteed to stay the same for the entire loan term.

That's the trade-off.

You may receive a lower interest rate today in exchange for accepting some uncertainty later.

How Much Could a North Texas Buyer Actually Save?

Let's look at a realistic example.

Suppose you're purchasing a $500,000 home in Denton County with a 20% down payment.

That leaves a $400,000 mortgage.

Using the MBA's October 28 average contract rates, here's how the initial monthly principal and interest payments compare:

That's approximately $3,072 per year in initial payment savings.

Over five years, the difference in scheduled payments would total approximately $15,360, assuming the rates remain unchanged during that period.

That's real money.

For some buyers, those savings could help build an emergency fund, pay down other debt, or provide breathing room in the monthly budget.

But there's an important catch.

After the initial fixed-rate period, the ARM's interest rate and payment can change.

These figures are illustrations using national survey averages, not personalized lender quotes. They exclude property taxes, homeowners insurance, HOA dues, mortgage insurance, and loan fees. Actual rates, terms, and savings will vary.

What Happens When an ARM Adjusts?

This is where buyers need to pay attention.

Let's say you choose a five-year ARM because you plan to refinance when interest rates drop.

Five years pass.

But what if rates haven't dropped?

Or what if your financial circumstances have changed and refinancing isn't an option?

Your interest rate could adjust upward, increasing your monthly mortgage payment.

Most modern ARMs have rate caps that limit how much the interest rate can change at the first adjustment, at subsequent adjustments, and over the life of the loan.

Those protections matter, but they don't eliminate the risk.

Before choosing an ARM, I would want a buyer to know the maximum possible payment—not just the attractive introductory payment.

A mortgage should work with your financial plan, not depend on everything going perfectly.

Are Today's ARMs the Same as the Mortgages That Contributed to the 2008 Crash?

Not necessarily, and this distinction is important.

The housing crisis involved several problems, including risky lending practices, inadequate documentation, speculative borrowing, and mortgage products that borrowers often didn't fully understand.

Today's mortgage market operates under stronger underwriting and consumer-protection requirements.

Many adjustable-rate mortgages now require documented income, verified assets, and an assessment of the borrower's ability to repay.

That doesn't mean every ARM is safe for every borrower.

It means we shouldn't automatically equate today's adjustable-rate mortgages with the riskiest loans from the early 2000s.

The product itself isn't necessarily the problem.

Choosing a mortgage without understanding its terms is.

When Might an ARM Make Sense?

There are situations where I think an adjustable-rate mortgage deserves serious consideration.

1. You're Planning to Move Within Several Years

If you're relocating to North Texas for work and expect another move within five to seven years, a longer initial fixed-rate period might align with your plans.

Of course, plans change. You should still be comfortable with the possibility of keeping the home longer.

2. You're Buying a Home That Isn't Your Forever Home

Maybe you're purchasing your first home in Denton or moving into a neighborhood like Harvest or Pecan Square while your family is growing.

If you anticipate another move in several years, an ARM may be worth comparing with a traditional fixed-rate mortgage.

3. You Have Strong Financial Reserves

Buyers with substantial savings and flexibility in their budgets may be better positioned to handle future payment adjustments.

They can benefit from lower initial payments without depending on those savings to make the home affordable.

4. You're Considering a Higher-Priced Home

On larger loan amounts, even a modest difference in interest rates can create substantial initial monthly savings.

This can make ARMs particularly worth evaluating for move-up and luxury buyers.

However, jumbo ARM programs can have different requirements, rates, and adjustment structures.

When Would I Be Cautious About an ARM?

There are also situations where I would encourage buyers to think very carefully.

If the lower initial payment is the only way you can afford the home.

That's a warning sign. Your budget needs room for the possibility of higher payments.

If you're planning to stay in the home for decades.

A fixed-rate mortgage provides long-term payment predictability that may be worth paying more for initially.

If you're counting on refinancing.

Refinancing isn't guaranteed. Rates may remain elevated, property values may change, or your income and credit could look different in several years.

If you don't have adequate savings.

Homeownership already comes with unexpected expenses. Adding the possibility of a rising mortgage payment can create unnecessary financial pressure.

Five Questions to Ask Before Choosing an ARM

Before signing anything, I would encourage buyers to ask their lender:

1. How much lower is the initial rate compared with a fixed-rate mortgage, after accounting for points and fees?

2. Exactly when can my interest rate begin adjusting?

3. What are the initial, subsequent, and lifetime rate caps?

4. What is the highest monthly payment I could face under the loan terms?

5. What happens if I can't refinance or sell when I originally planned?

I would also compare Loan Estimates from multiple lenders.

The lowest advertised interest rate isn't always the least expensive loan.

What Does This Mean for the North Texas Housing Market?

The growing interest in adjustable-rate mortgages tells us something important about buyers.

They're looking for ways to make the numbers work.

In communities throughout southern Denton County—including Argyle, Bartonville, Flower Mound, Northlake, and Denton—monthly affordability remains an important part of the homebuying conversation.

And mortgage structure is only one piece of that equation.

Buyers should also evaluate purchase price, property taxes, insurance, HOA costs, seller concessions, and their expected length of ownership.

In some situations, negotiating a seller-paid rate buydown or a lower purchase price may provide a better financial outcome than choosing an adjustable-rate mortgage.

In others, an ARM could be the right tool.

The answer depends on the buyer, the property, and the actual financing options available.

My Take: Don't Rule Out an ARM, but Don't Chase the Lowest Payment

After a decade helping buyers and sellers navigate the North Texas real estate market, one thing I've learned is that there isn't a single financing strategy that works for everyone.

I don't think adjustable-rate mortgages should automatically scare buyers.

I also don't think they should be used simply to stretch a budget beyond what's comfortable.

A well-structured ARM can be a useful financial tool.

But buyers need to understand what they're getting, what they're giving up, and what happens if their plans change.

The goal isn't just to qualify for the home you want today. It's to feel comfortable owning it five or ten years from now.

If you're considering buying a home in Argyle, Flower Mound, Denton, Northlake, or the surrounding North Texas communities, I'm happy to help you evaluate your options and connect you with trusted lenders who can compare financing scenarios.

Because finding the right house is only half the equation. Making sure the numbers work is just as important.

Tanya O'Neil is an Associate Broker and team lead of The Estancia Group at Real Brokerage, serving buyers and sellers throughout Denton County and North Texas.