How to Refinance Your ARM Into a Fixed-Rate Mortgage 

If you started your homeownership journey with an adjustable-rate mortgage (ARM), you’re not alone. ARMs can be an appealing choice due to their lower initial interest rates, especially during periods of higher interest rates. 

The uncertainty of rate adjustments can cause financial stress, though. If the potential of a higher interest rate and monthly payment amount has you considering a change, refinancing to a fixed-rate mortgage could provide the stability and peace of mind you’re looking for. Market shifts that cause fixed-rate mortgages to dip down are also often a reason homeowners look at refinancing from an adjustable-rate mortgage. 

In this blog post, we will guide you through everything you need to know about refinancing your ARM into a fixed-rate mortgage, why it can be a smart move, and how working with a trusted lender can simplify the process. 

What Does It Mean to Refinance Your Mortgage? 

Refinancing your mortgage means replacing your current home loan with a new one, often to secure better terms or to adjust the type of loan you have.  

When you refinance, your new loan is used to pay off the remaining balance of your old loan, and you start making payments under the terms of the new mortgage agreement. 

What Is an Adjustable-Rate Mortgage (ARM)? 

An Adjustable-Rate Mortgage is a type of home loan with an interest rate that adjusts periodically after an initial fixed-rate period.  

For example, a 5/1 ARM features a fixed interest rate for the first five years, after which the rate adjusts annually based on market conditions. 

Homebuyers often choose ARMs for their lower initial rates during time periods where fixed rates are higher, which can make monthly payments more affordable in the beginning of the loan . However, as interest rates rise, so can your monthly payment, leaving you with financial uncertainty. 

Why Should You Consider Refinancing Your ARM? 

Before deciding to refinance your mortgage, you should consider your overall financial goals.  

Some typical financial goals homeowners have when deciding to refinance an ARM are: 

• Protecting Yourself Against Rising Rates: With a fixed-rate mortgage, your interest rate remains constant for the life of the loan, so you don’t have to worry about rate hikes. 

• Stabilizing Your Payments: A predictable monthly payment makes budgeting for your long-term financial goals more manageable. 

• Giving Yourself Peace of Mind: Eliminating the uncertainty of future rate adjustments can reduce stress and give you confidence in your financial future. 

Refinancing could be a smart move if you’re nearing the end of your ARM’s fixed-rate period or are concerned about rising interest rates. Your end goal will also affect the timing of when you refinance. 

Steps to Refinance Your ARM to a Fixed-Rate Mortgage 

Step 1: Evaluate Your Current Mortgage Terms 

You should start by reviewing your current loan documents. Identify the date of your next rate adjustment, the adjustment cap, and your current interest rate. This information will help you determine the urgency of refinancing. 

Step 2: Research Fixed-Rate Mortgage Options 

Then you can look for a fixed-rate loan that aligns with your financial goals. A trusted loan officer can help you compare options and find competitive rates tailored to your needs. 

Step 3: Check Your Credit and Financial Health 

Your credit score and financial situation will significantly affect the terms you’re offered. Make sure your credit is in good shape and gather documentation like income statements and tax returns. 

Step 4: Calculate Costs vs. Savings 

Refinancing is not free. It does come with closing costs, just like your initial loan. However, the long-term savings can outweigh the upfront expense. You can use a mortgage calculator or consult a lender to estimate your break-even point. 

Step 5: Partner With a Trusted Loan Officer 

The right loan officer can guide you through the refinancing process, offering expert advice and ensuring a smooth transition from your ARM to a fixed-rate mortgage. 

Refinancing your ARM to a fixed-rate mortgage can provide the financial stability and peace of mind you deserve. Whether you’re tired of fluctuating payments or simply ready to lock in a great rate, a First Heritage Mortgage loan officer is here to help. 

Get started with one of our loan officers on a no-obligation consultation and take the first step toward a more secure financial future.