ARM vs Fixed Rate in Tennessee
With Tennessee's median home at $310,000 and conforming limit at $726,200, choosing between an ARM and a fixed-rate mortgage comes down to your time horizon and risk tolerance. Nashville and suburbs (Williamson, Rutherford, Wilson counties) have seen 40-60% appreciation since 2020. Knoxville has also emerged as a top relocation destination. Memphis remains the state's most affordable major market.
When an ARM May Make Sense in Tennessee
- You plan to sell or refinance within 5-7 years
- You're buying in a high-cost Tennessee market where even a small rate reduction meaningfully lowers payments
- Rates are at cyclical highs and expected to fall — ARM initial rates can be 0.5-1% lower than fixed
When Fixed Rates Win in Tennessee
- You plan to stay long-term (10+ years)
- Payment certainty matters more than short-term savings
- Tennessee's property taxes (0.66%, avg $1,220/year) add enough payment variability without adding rate risk
Closing Costs
Either product incurs similar closing costs (~$2,500 in Tennessee). Frequent refinancing to escape an ARM adds these costs repeatedly.
Frequently Asked Questions
Is an ARM or fixed mortgage better in Tennessee?
It depends on how long you plan to stay. Tennessee's median home of $310,000 with a 5/1 ARM can save on initial payments, but fixed rates offer certainty — especially important given Tennessee's property tax rate of 0.66% adds its own payment variability.
What are conforming loan limits for ARMs in Tennessee?
ARMs and fixed-rate loans both have the same conforming limit in Tennessee: $726,200. No Tennessee counties currently qualify for high-cost conforming limits.
How much can I save with an ARM in Tennessee?
ARM initial rates are typically 0.5-1% below 30-year fixed rates. On a $248,000 loan (20% down on Tennessee's median home), that's roughly $100-200/month in savings during the initial period.
What are closing costs for a mortgage in Tennessee?
Tennessee charges a transfer tax of $0.37/$100 of value (a deed tax), which is very low. Overall closing costs are among the lowest in the Southeast. Budget approximately $2,500 in total closing costs for either an ARM or fixed-rate mortgage in Tennessee.