What Is an ARM (Adjustable-Rate Mortgage) and How Do Investors Use Them?

February 10, 2026

What does ARM mean, and how does it work for rental property loans?

An ARM, or Adjustable-Rate Mortgage, is a mortgage loan where the interest rate is not fixed for the entire loan term. Instead, the rate changes at predetermined intervals after an initial fixed-rate period.

In real estate investing—particularly with DSCR loans—many ARMs are more accurately described as hybrid or fixed-to-ARM loans. These loans start with a fixed interest rate for a set period and then transition to an adjustable rate based on a defined schedule.

How Hybrid ARM Loans Work

Most DSCR ARM loans are structured with an initial fixed-rate period, commonly five or seven years, followed by periodic rate adjustments. This structure allows investors to benefit from rate stability early on while maintaining flexibility over the long term.
You’ll often see ARM loans described using a shorthand format such as 5/1 or 7/1:
  • The first number represents the length of the initial fixed-rate period
  • The second number indicates how often the rate adjusts after that period
For example, a 5/1 ARM has a fixed rate for the first five years, then adjusts annually after that.

Why Investors Use ARM Structures

ARM loans can be attractive for real estate investors because they often offer:
  • Lower initial interest rates compared to fully fixed-rate loans
  • Predictable payments during the initial fixed period
  • Flexibility for investors planning to refinance, sell, or reposition a property before the adjustable period begins
For DSCR borrowers in particular, ARM structures can align well with investment timelines, cash-flow strategies, and long-term portfolio planning.

ARM Loans in DSCR Financing

In DSCR lending, ARM loans are underwritten based on the property’s income rather than the borrower’s personal income. This allows investors to pair an ARM structure with income-based qualification—creating a financing solution that supports both cash flow and scalability.

Understanding how ARMs work—and whether a hybrid structure fits your strategy—is an important step when evaluating rental property financing options.

At Lend Investors Capital, we help investors navigate DSCR loan structures, including fixed-rate and hybrid ARM options, to ensure financing aligns with their investment goals and exit strategy. If you’re exploring ARM loans for a rental property or portfolio, our team is here to help you evaluate the right approach.