What will my ARM rate increase to and when

If you are like many homeowners in the last few years who purchased or refinanced their home with an ARM mortgage then you may well be in for a payment shock if your ARM adjusts in the near future.

Many borrowers are facing the prospect of an adjustable rate mortgage (ARM) increase in rate and payments. There are many alternatives available to refinance into a fixed rate mortgage. Contact a mortgage broker to evaluate your alternatives.

When shopping for an adjustable rate mortgage, be sure to ask what your fully indexed rate is. When your rate is ready to adjust, it will adjust towards the amount of your fully indexed rate. Your fully indexed rate is your margin plus the index in which your adjustable rate is based.

Many adjustable rate mortgages written in the past 5 years are hybrid ARM mortgages, with a fixed rate period of several years. IF your loan was a 2/28 ARM or 2/38 ARM, the fixed rate period is 2 years, after which period the rate will begin to adjust every 1 month, 6 months or 1 year thereafter. If you have a 3/27 ARM or 3/37 ARM then the rate is fixed for the first 3 years. A 5/1 ARM, 7/1 ARM or 10/1 ARM will remain fixed for 5 years, 7 years, or 10 years, respectively.

A large number of Adjustable Rate Mortgages have an initial adjustment cap which allows your rate to increase by 3%, 5%, 6% or more at the first adjustment date, which can as much as double your payment if you have a low start rate on your ARM mortgage. Review the terms of your note or contact us at or for more information on when and how much your adjustable rate mortgage payment may change.

If you plan to stay in your home much longer, it is a good idea to refinance into a fixed rate mortgage. When you originally acquired the ARM, your credit may not have been the best. If you've made your monthly mortgage payments on time, chances are your credit score has gone up significantly. This will likely help you qualify for a much more attractive, fixed rate mortgage option now. It is certainly well worth looking into!

You should have received a copy of all the documentation you signed at closing. If you read through the first couple pages of the "Note" or the "Mortgage" it will describe when your payment can start to adjust, and what any caps on that adjustment are.

An Adjustable rate Mortgage can potentialy increase after the adjustment date. However the amount of increase is dictated by the periodic caps indicated on your adjustable rate rider that was signed along with your mortgage documents.

Most consumers who have adjustable rate mortgages that are getting ready to adjust are going to not only see a rate increase and a payment increase, but this increase will most likely result in the maximum increase that is permitted for your loan. The reason for this is because your adjustable rate loan was obtained when your index, the adjustable part of your interest rate, was much lower than it currently is now. The first adjustment rate cap is normally around 1%-2%, and this means that you can most likely expect to see a 1%-2% increase in your interest rate on your mortgage. This increase could easily raise your payment hundreds of dollars per month. If you are currently in this situation, please contact a mortgage professional soon to discuss your options and the possibility of refinancing.