Adjustable-Rate Mortgages in Texas: A Smart Option for Jumbo Buyers

Adjustable-rate mortgages are becoming increasingly relevant for Texas homebuyers, particularly borrowers taking out jumbo loans. When a 5-year or 7-year ARM offers a meaningfully lower interest rate than a comparable 30-year fixed mortgage, the savings can add up quickly on a $1 million, $1.5 million or $2 million loan.

That does not mean every jumbo buyer should choose an ARM. It means every jumbo buyer should compare one. LendFriend Mortgage has recently closed Texas jumbo loans where borrowers reduced their rate by 0.375%, 0.50% and even 0.75% by choosing an adjustable-rate mortgage instead of the available fixed-rate alternative. For buyers who expect to move, refinance or pay down a large portion of their mortgage within several years, an ARM can be one of the smartest financing options available.

What Is an Adjustable-Rate Mortgage?

An adjustable-rate mortgage, or ARM, is a mortgage where the interest rate remains fixed for an initial period and can adjust afterward.

Common structures include:

• 5-year ARM: The initial interest rate remains fixed for 5 years.
• 7-year ARM: The initial rate remains fixed for 7 years.
• 10-year ARM: The initial rate remains fixed for 10 years.

After the initial fixed period expires, the mortgage rate can adjust according to the index, margin and adjustment caps established by the loan.

The important distinction is that the rate does not fluctuate during the initial fixed period. If you choose a 5-year ARM, your initial interest rate remains fixed for those first 5 years.

For a deeper explanation of how these loans work, see our guide to adjustable-rate mortgages. You can also compare the advantages of a fixed vs. variable mortgage.

Why Adjustable-Rate Mortgages Are Becoming Popular Again

The primary reason is straightforward: ARMs can offer lower initial mortgage rates than comparable 30-year fixed loans.

For someone borrowing $300,000, a difference of a few tenths of a percentage point is useful.

For someone borrowing $1.5 million, it can become a serious amount of money.

That is why jumbo borrowers should look at the actual payment difference rather than immediately defaulting to a 30-year fixed mortgage because it feels familiar.

Use our ARM vs. fixed mortgage calculator to compare the monthly payment and estimated savings during the ARM's initial fixed-rate period.

A 30-year fixed mortgage gives you certainty for 30 years. That certainty has value. But if you expect to own the mortgage for only 5, 7 or 10 years, you should ask whether paying extra for 30 years of rate protection makes sense.

Why Jumbo ARMs Can Be Especially Attractive in Texas

Jumbo mortgages are common throughout higher-priced Texas housing markets. The 2026 conforming loan limit for most one-unit properties is $832,750, so a mortgage above that amount generally falls into jumbo territory.

That includes buyers purchasing luxury and higher-priced homes throughout:

• Austin and Central Texas
• Dallas and Highland Park
• Houston and The Woodlands
• West Lake Hills and Lake Travis
• Frisco and Southlake
• San Antonio

LendFriend Mortgage offers Texas jumbo loans ranging from traditional fixed-rate mortgages to ARMs and non-QM jumbo programs for borrowers with more complicated income or asset profiles.

The larger the mortgage, the more important the rate comparison becomes.

A jumbo borrower should not just ask, "What's the mortgage rate?"

They should ask, "What's the best mortgage structure for how long I realistically expect to keep this loan?"

3 Texas Jumbo Buyers Who Chose an ARM

We have seen this play out repeatedly with actual LendFriend Mortgage borrowers.

Steiner Ranch: $900,000 mortgage with a 5-year ARM.
The borrower chose a 5-year adjustable-rate mortgage instead of the available fixed-rate option and reduced the interest rate by approximately 0.50%.

On a mortgage approaching $1 million, that difference creates meaningful monthly savings during the initial fixed period.

West Lake Hills: $2 million mortgage with a 5-year ARM.
A highly qualified borrower with exceptional credit and overall qualifications selected a 5-year ARM and reduced the available rate by approximately 0.75% compared with the fixed-rate option available on the transaction.

A 0.75% pricing difference on a $2 million mortgage is difficult to ignore.

Tarrytown: $1.5 million mortgage with a 7-year ARM.
Another borrower selected a 7-year ARM and reduced the interest rate by approximately 0.375%.

The borrower sacrificed some of the potential pricing advantage of a shorter ARM in exchange for 2 additional years of fixed-rate certainty.

These are exactly the types of comparisons jumbo borrowers should be making.

When Does an Adjustable-Rate Mortgage Make Sense?

An ARM is not automatically better because the starting interest rate is lower. The savings should fit your expected timeline and financial strategy.

ARMs tend to deserve a closer look when:

• You expect to move within 5 to 10 years. If you are unlikely to own the property for 30 years, paying for 30 years of rate certainty may not provide much benefit.
• You expect to refinance. Some borrowers believe rates could eventually decline and would rather take the lower ARM rate today while retaining the ability to refinance later.
• You expect a future liquidity event. A large annual bonus, RSU vesting, business sale, inheritance or sale of another property could allow you to substantially reduce the mortgage balance later.
• You are taking out a large jumbo mortgage. Small changes in interest rate have a larger dollar impact as the loan amount increases.
• You value liquidity. A borrower may prefer to keep money invested rather than making an unnecessarily large down payment just to reduce the mortgage balance.

The decision should still work even if your original plan changes. You should understand what happens after the fixed period and be comfortable with the possibility that refinancing may not be attractive when the ARM eventually adjusts.

You May Be Able to Combine a Jumbo ARM With 5% Down

One of the biggest misconceptions about jumbo mortgages is that every borrower needs 20% down.

They do not.

LendFriend Mortgage has access to jumbo programs that can allow qualified borrowers to purchase with as little as 5% down, depending on loan size, credit, reserves, property type and the overall strength of the file.

Our Texas jumbo programs include low-down-payment structures for qualified borrowers who want to preserve liquidity rather than place hundreds of thousands of additional dollars into the property.

Consider a $1.5 million purchase.

A 20% down payment requires $300,000.

A 5% down payment requires $75,000.

That is a difference of $225,000 in liquidity before accounting for closing costs and reserves.

For a borrower with strong income and assets, keeping that additional capital invested, available for a business or simply sitting in reserves may be more valuable than maximizing the down payment.

Our guide to 5% down jumbo loans explains when these programs may be available and how qualification works.

Jumbo ARMs in Dallas and Houston

The ARM strategy is not limited to Austin.

Dallas-Fort Worth has a substantial luxury housing market, particularly in areas such as Highland Park, University Park, Southlake and Frisco. Buyers financing higher-priced properties in these markets should compare jumbo ARM pricing with traditional 30-year fixed jumbo mortgages.

Houston buyers face many of the same decisions.

River Oaks, Memorial, West University, Bellaire and The Woodlands regularly produce loan amounts where jumbo financing becomes relevant. Houston also has a large population of executives, entrepreneurs, energy professionals and business owners whose compensation may include bonuses, equity, partnership income or other nontraditional income.

That makes Houston particularly well suited to comparing:

• Traditional jumbo mortgages
• Jumbo ARMs
• Bank statement jumbo loans
• Asset depletion mortgages
• Other non-QM programs

LendFriend's Texas jumbo programs are designed for borrowers throughout Austin, Dallas, Houston, San Antonio and other higher-value Texas markets.

Non-QM ARMs Can Solve More Than One Problem

ARMs are not limited to traditional W-2 borrowers.

Many non-QM mortgages also offer adjustable-rate structures.

Non-QM financing is designed for borrowers who may have strong finances but do not fit neatly into conventional mortgage underwriting.

That could include:

• Self-employed borrowers qualifying through bank statements
• Entrepreneurs with substantial business income
• High-net-worth borrowers with limited W-2 income
• Retirees living primarily from investments
• Borrowers using asset depletion
• Real estate investors

A borrower can therefore have 2 separate questions:

How should I qualify for the mortgage?

And:

Should I choose a fixed or adjustable rate?

Those decisions can be evaluated together.

A borrower might qualify through asset depletion and still choose a 5-year or 7-year ARM because the pricing is better than the available fixed-rate option.

Asset Depletion and Jumbo ARMs

Asset depletion is particularly relevant for Texas jumbo borrowers.

A high-net-worth borrower may have several million dollars in brokerage accounts, retirement funds and other eligible assets while reporting relatively little traditional income.

Instead of selling investments or relying entirely on W-2 income, an asset depletion mortgage converts eligible assets into qualifying monthly income.

LendFriend Mortgage offers asset depletion mortgages in Texas for high-net-worth borrowers purchasing or refinancing homes throughout Austin, Dallas, Houston and other Texas luxury markets. Programs can accommodate significant loan amounts, including jumbo asset depletion financing.

We also offer jumbo asset depletion loans for borrowers purchasing higher-value properties.

The advantage is flexibility.

A borrower may be able to:

• Qualify using investment and retirement assets
• Avoid selling a large investment portfolio simply to show income
• Preserve liquidity
• Finance a high-value property
• Compare fixed and adjustable-rate options

Different lenders calculate asset depletion very differently, so choosing the lender is just as important as choosing the loan structure.

What Happens After the Fixed Period?

This is the part borrowers should understand before choosing an ARM.

Once the initial fixed period ends, the interest rate can adjust according to the terms of the mortgage.

The future rate typically depends on:

• Index: The market benchmark used by the mortgage.
• Margin: The amount added to the index to determine the new rate.
• Initial adjustment cap: How much the rate can change at the first adjustment.
• Periodic adjustment cap: How much it can change at later adjustments.
• Lifetime cap: The maximum adjustment permitted over the life of the mortgage.

Today's ARMs include adjustment caps designed to limit how quickly the interest rate can change.

You should know those caps before closing.

The strongest ARM borrower is not someone assuming they will definitely refinance in 5 years. It is someone who understands the adjustment risk and still believes the savings during the initial fixed period justify choosing the ARM.

A 5-Year ARM vs. a 7-Year ARM

Choosing between ARM terms is another tradeoff.

A 5-year ARM frequently offers a stronger pricing advantage because the lender is committing to the initial rate for a shorter period.

A 7-year ARM gives the borrower 2 additional years before the first adjustment.

That is why our borrowers have chosen both.

The Steiner Ranch and West Lake Hills borrowers selected 5-year ARMs because the pricing differences were compelling.

The Tarrytown borrower selected a 7-year ARM and still achieved approximately a 0.375% rate improvement while gaining 2 additional years of certainty.

The best choice depends on how much pricing you receive in exchange for taking the shorter fixed period.

ARMs Can Also Work for Jumbo Refinances

ARMs are not only purchase loans.

A homeowner refinancing a large existing mortgage may also find that an ARM offers more attractive economics than another 30-year fixed mortgage.

That could include someone refinancing to:

• Reduce their interest rate
• Change their loan structure
• Access home equity
• Consolidate higher-cost debt
• Move from one jumbo product into another

Texas homeowners considering a larger equity transaction should also review LendFriend's jumbo cash-out refinance options.

Texas has specific cash-out refinance rules, so these transactions need to be structured carefully.

Why Working With a Mortgage Broker Matters More With ARMs

Mortgage pricing is not uniform.

One lender may be excellent for 30-year fixed jumbo mortgages but mediocre on 5-year ARMs.

Another lender may aggressively price 7-year ARMs.

Another may offer the strongest asset depletion program.

Another may be willing to combine a low down payment with a competitive jumbo structure.

That is why jumbo borrowers benefit from comparing lenders rather than assuming their bank has the best product.

LendFriend Mortgage works across a large network of wholesale lenders and compares jumbo fixed rates, ARMs, low-down-payment programs and non-QM financing based on the specific borrower.

For jumbo borrowers, even a relatively small difference in pricing can translate into thousands of dollars.

The Bottom Line on Adjustable-Rate Mortgages in Texas

A 30-year fixed mortgage remains a great option for borrowers who value long-term certainty and expect to keep the same mortgage for many years.

But a jumbo borrower should not automatically choose one without seeing the ARM alternative.

We recently helped a Steiner Ranch borrower reduce the available rate by approximately 0.50% with a 5-year ARM, a highly qualified West Lake Hills borrower reduce the rate by approximately 0.75% on a $2 million mortgage, and a Tarrytown borrower reduce the rate by approximately 0.375% with a 7-year ARM.

Those differences become meaningful on large mortgage balances.

Add in jumbo programs that may allow qualified borrowers to put as little as 5% down, along with non-QM and asset depletion options, and adjustable-rate mortgages become an important part of financing higher-priced homes throughout Texas.

LendFriend Mortgage helps buyers in Austin, Dallas, Houston, San Antonio and across Texas compare jumbo ARMs, fixed-rate mortgages, low-down-payment jumbo loans, asset depletion mortgages and other non-QM options.

Before locking into a 30-year fixed mortgage, compare both structures.

The savings may make the decision much easier.