Understanding Adjustable-Rate Mortgage as a Physician

With lower initial interest rates and flexible terms, an adjustable-rate mortgage (ARM) helps save money upfront.

This makes these loans a great option if you’re a physician currently doing your residency or fellowship or are in the early stages of your career as an attending physician.

Still, knowing how they work and whether they suit your current situation and future plans is important before signing up for an ARM.

This guide breaks down everything you need to know

What Are Adjustable-Rate Mortgages?

Adjustable-rate mortgages are home loans with interest rates that fluctuate over time.

This means that when you sign up for an ARM, you’ll get a fixed interest rate for a set period, often between five to ten years.

Once this fixed period is over, your rate will adjust periodically based on an index like the LIBOR or SOFR, plus a set margin.

This can increase your monthly payments by 10% to 300%—and sometimes even more.

ARMs vs. Fixed-Rate Mortgages for Physicians

The main difference between ARMs and fixed-rate mortgages is the interest rate variability.

ARMs have a fixed interest rate for a specific period of the loan, with the rest of the term having a variable rate.

Fixed-rate mortgages have the same payment for the life of the loan, which can be between 10 and 30 years.

This makes budgeting easier, especially if you’re a physician still in your early career.

Here’s a quick table that differentiates between both types of mortgages:

Fixed-rate mortgages	Adjustable-rate mortgages
Fixed-rate for the loan term	Variable rate that increases/decreases over time
Easier to budget for	Can be unpredictable in the latter half (after the fixed interest rate is off)
Fixed monthly payment	Monthly payments can change frequently

Pros and Cons of ARMs for Physicians

Here are some pros and cons of ARMs for physicians:

Pros

• Lower initial interest rate compared to fixed mortgages: ARMs are typically much cheaper than fixed-rate mortgages in the first three to seven years. They averaged 6.56% in 2024.
• Low to no down payment: Some ARMs like doctor’s mortgages have a very low down payment or no down payment at all. This helps doctors who are short on cash invest in equity early.
• No private mortgage insurance (PMI): When you’re going for an ARM like a doctor’s mortgage, you can avoid PMI. PMI is a monthly premium that protects your lender if you default on the loan.
• Potential savings for short-term ownership: If you’re planning to sell or relocate within a few years—such as when you’re waiting to get a medical license in another state—ARMs help you relieve the stress of borrowing, thanks to low initial rates.
• Available to residents and fellows with a low income: If you’ve just graduated medical school or have a low income—such as if you’re working locum tenens—you may not be eligible for fixed-rate mortgages. In these cases, ARMs help you skirt this issue and invest in a home.

Cons

• Rate adjustments can lead to payment increases: Once your initial fixed-rate period ends, your payments can potentially increase. This means you may end up paying more over the life of your loan.
• High interest rates at the end: While ARMs have a lower interest rate at the beginning, the final rate is usually higher compared to fixed mortgages, especially if you’re going for a long-term loan.
• Difficult planning: If you go with an ARM and interest rates fluctuate constantly, budgeting for your monthly mortgage payments will become tricky.

When Should You Get an Adjustable-Rate Mortgage as a Physician?

Just because you can get an ARM doesn’t mean you should always get it.

Here are three situations where you should consider an adjustable-rate mortgage as a physician:

1. When You’re Going to Stay In One Place for Three to Five Years

If you plan to own a home for a short period, such as during your residency, fellowship, or the early years of your practice, an ARM can help you take advantage of lower initial interest rates without worrying about long-term rate adjustments.

2. When Your Income Is Likely to Grow

Your income is likely to grow as you move from training to practice.

If you’re in this transition period, you can get an ARM to make loan payments on your apartment, home, or practice building and free up cash for paying down your student loans—or other priorities.

3. When You Expect to Refinance Before Your Rate Adjusts

If you’re confident that you can refinance your ARM into a fixed-rate mortgage before the adjustable period begins, you can consider this type of loan.

But you’ll need to own the home for at least six months, have 20% equity in it, and pay closing costs to refinance your ARM.

Sometimes, you may have to meet certain credit score requirements as well.

How to Get the Best ARM as a Physician

If you want an ARM that works for you, take the following steps first:

1. Figure Out For How Long You Want to Own Your Home

An ARM is not for every physician. If you’re thinking about one, you need to know exactly how long you’re planning on keeping your property.

If it’s longer than ten years, you might want to look at fixed mortgages.

But if you expect to move or refinance before the fixed-rate period ends, an ARM—especially a physician mortgage loan—can save you money.

Just make sure to look for one that matches your timeline.

For instance, a 5/1 ARM would work if you plan to own your property for about five years.

2. Understand the Adjustment Terms

Talk to lending officers and compare terms across lenders to get the best deal. Here’s what to look for when looking for the best deal:

• Rate caps: These are limits on how much the interest rate can increase at each adjustment and over the life of the loan. You should pick an offer with a low cap.
• Adjustment frequency: This is how often your rate adjusts, such as annually or semi-annually, after the fixed period. For instance, in a 7/1 ARM, your rate will be fixed for seven years and then adjusted every year.
• Index and margin: The index affects your rate changes and your margin adds to it. A lower margin means less fluctuation in your payments.

3. Talk to a Financial Advisor

As a physician, you may not have the time and experience to get the full picture of an adjustable-rate mortgage.

This is especially true when you have to go through several lenders to find a loan that meets your needs.

You may also not be sure which questions to ask.

Getting a financial advisor on board will help avoid the time investment entirely and gain access to loan options you might not find on your own.

Your advisor will also negotiate terms on your behalf and make sure they fit your current financial obligations and future plans.

Get the ARM Terms You Need With Physicians Thrive

Homeownership is an emotional marker of success, and for most physicians, the emotional security it provides is worth the financial costs.

An ARM helps you buy a home without breaking the bank.

However, not all ARMs are made equal, so you need to:

• Understand what you want before you start searching, such as how long your loan terms should be
• Compare terms across several loans to find the right offer
• Work with a financial advisor that puts your goals first

At Physicians Thrive, our financial experts help you get the loan your situation requires, whether it’s a commercial, student, short-term, or physician mortgage.

We also help you refinance your loan for the lowest rate possible.

Want to learn how we can help you access loans that work for you? Reach out to us today!