Purchasing a home in Riverside, California, is an exciting venture, especially with the region’s vibrant communities and diverse real estate offerings. As you explore homes around the median sold price of $650,000, one of the most critical decisions you’ll face is choosing the right mortgage. Today, we’ll dive deep into a comparison of two popular options: the 7/6 Adjustable-Rate Mortgage (ARM) and the traditional 30-year Fixed-Rate Mortgage, considering today’s rates and a crucial element – the break-even on points.
Understanding Your Mortgage Options for a $650,000 Home in Riverside
For a $650,000 home, assuming a standard 20% down payment to avoid Private Mortgage Insurance (PMI), your loan amount would be $520,000. Let’s examine how two distinct mortgage products can impact your monthly payments and long-term financial planning in Riverside.
The 30-Year Fixed-Rate Mortgage: Stability You Can Count On
The 30-year fixed-rate mortgage is a cornerstone of home financing, beloved for its predictability. With this loan, your interest rate remains constant for the entire 30-year term. This means your principal and interest (P&I) payment will be the same every month, regardless of market fluctuations. This stability makes budgeting straightforward and offers peace of mind.
The 7/6 Adjustable-Rate Mortgage (ARM): Flexibility with Potential Savings
A 7/6 ARM offers an initial fixed interest rate for the first seven years (the ‘7’). After this period, the interest rate adjusts every six months (the ‘6’), based on a predetermined index plus a margin set by your lender. ARMs typically start with a lower interest rate than comparable fixed-rate mortgages, which can translate to lower initial monthly payments. However, the trade-off is the uncertainty of future rate adjustments, though most modern ARMs come with caps that limit how much your rate can increase per adjustment and over the life of the loan.
Today’s Illustrative Rates for Your Riverside Home
To provide a concrete comparison, let’s look at illustrative rates for a $520,000 loan in Riverside, CA, as of late October 2025. Please note that these rates are for illustrative purposes and actual rates can vary based on your creditworthiness, market conditions, and specific lender offers.
- 30-Year Fixed-Rate Mortgage: Let’s consider an illustrative rate of 6.250% (e.g., 6.315% APR).
- 7/6 Adjustable-Rate Mortgage (Initial Fixed Period): Let’s consider an illustrative initial rate of 5.875% (e.g., 5.940% APR).
Comparing Initial Monthly Payments for a $650,000 House
Based on a $520,000 loan amount, here’s how the initial principal and interest payments would compare:
- 30-Year Fixed (6.250%): Approximately $3,198.05 per month.
- 7/6 ARM (Initial 5.875%): Approximately $3,086.83 per month.
In this scenario, the 7/6 ARM offers a lower initial monthly payment, providing potential savings of over $111 per month during the first seven years compared to the 30-year fixed rate.
The ‘Points’ Puzzle: When Does Paying Upfront Make Sense?
‘Mortgage points,’ also known as ‘discount points,’ are a one-time fee you pay directly to the lender at closing in exchange for a lower interest rate on your loan. Each point typically costs 1% of your total loan amount. So, for a $520,000 loan, one point would cost $5,200. This upfront payment ‘buys down’ your interest rate, usually by about 0.25% per point.
Breaking Even on Mortgage Points
Deciding whether to pay points depends on how long you plan to stay in your home or keep the mortgage. The key is to calculate your ‘break-even point’ – the time it takes for your monthly savings from the lower interest rate to offset the upfront cost of the points.
Let’s illustrate with our 30-year fixed-rate example:
- Original Rate: 6.250% (Monthly P&I: $3,198.05)
- Cost of 1 Point: $5,200 (1% of $520,000)
- New Rate with 1 Point: 6.000% (a 0.25% reduction)
- New Monthly P&I at 6.000%: Approximately $3,117.70
- Monthly Savings: $3,198.05 – $3,117.70 = $80.35
- Break-Even Point: $5,200 (Cost of Point) / $80.35 (Monthly Savings) ≈ 64.72 months or approximately 5 years and 5 months.
If you plan to stay in your Riverside home for longer than 5 years and 5 months, paying one point at closing to lower your 30-year fixed rate could save you money over the long term. Conversely, if you anticipate selling or refinancing before this break-even period, paying points might not be financially advantageous.
Who Should Choose Which Option?
The best mortgage choice for your $650,000 home in Riverside depends entirely on your financial situation, risk tolerance, and long-term goals.
When a 30-Year Fixed Might Be Best:
- Seeking Stability: You prioritize predictable monthly payments and want to insulate yourself from future interest rate hikes.
- Long-Term Homeownership: You plan to stay in your Riverside home for many years, making the consistent payment a long-term budgeting advantage.
- Budget Certainty: You prefer the peace of mind that comes with knowing your principal and interest payment will never change.
When a 7/6 ARM Might Be Appealing:
- Shorter-Term Plans: You anticipate selling your home or refinancing within the initial seven-year fixed period. Many homeowners move or refinance before their ARM adjusts.
- Lower Initial Payments: You want to maximize your cash flow in the short term, perhaps to fund other investments or savings.
- Expect Rates to Drop (or Refinance): You believe interest rates will decline, allowing you to refinance into a lower fixed rate before your ARM adjusts significantly upward.
Riverside’s Dynamic Housing Landscape
The Riverside housing market, with a median home sold price around $650,000, has shown some stabilization and is considered a balanced market as of August 2025. While there have been slight price adjustments in the past year, forecasts suggest potential stabilization and modest growth in 2026, with average mortgage rates possibly dropping. This market context is vital when considering an ARM, as future market shifts could influence your rate adjustments or refinancing opportunities.
Conclusion
Choosing between a 7/6 ARM and a 30-year fixed mortgage for your $650,000 home in Riverside is a significant decision. While the 30-year fixed offers unparalleled stability, the 7/6 ARM can provide attractive initial savings, especially if your plans are shorter-term. Understanding the break-even point on mortgage points further refines your decision, allowing you to strategically reduce your interest rate if long-term savings are your goal.
Navigating these complexities requires expert guidance. As your dedicated mortgage professionals, we are here to provide personalized advice, analyze the latest rates for your unique financial profile, and help you make an informed decision that aligns with your homeownership dreams in Riverside, California.
Ready to explore your mortgage options or find your perfect home in Riverside? Contact us today for a personalized consultation!
Rate Trac Mortgage, NMLS #2333681, Licensed in CA. For information only. Not a commitment to lend. All loans subject to credit and underwriting approval. Rates, APRs, and terms may change without notice and vary by borrower and property. Not legal, tax, or financial advice. Equal Housing Lender.