Table of Contents

8 min read May 29, 2023

Convert an Adjustable-Rate Mortgage (ARM): Is It Possible to Refinance?

If you are currently burdened with an Adjustable-Rate Mortgage (ARM) and seeking stability in your monthly mortgage payments, refinancing your ARM into a Fixed-Rate Mortgage might be the solution you’re looking for.

By converting your variable interest rate to a fixed one, you can secure predictable payments and potentially save money in the long run. In this article, we will explore the process of refinancing an ARM and discuss the feasibility of transitioning to a fixed-rate mortgage.

Can You Refinance An ARM Loan?

Yes, it is possible to refinance an ARM loan. Refinancing an Adjustable-Rate Mortgage (ARM) involves replacing it with a new loan, often a Fixed-Rate Mortgage.

By refinancing, you can transition from a variable interest rate to a fixed one, providing stability and predictability in your monthly mortgage payments.

Refinancing an ARM loan may also allow you to take advantage of lower interest rates, extend or shorten the loan term, or access equity in your home.

Adjustable-Rate Mortgage Vs. Fixed-Rate Mortgage

An Adjustable-Rate Mortgage (ARM) and a Fixed-Rate Mortgage are two different types of home loans with distinct characteristics:

  1. Adjustable-Rate Mortgage (ARM):
    • Interest Rate: The interest rate on an ARM loan is initially lower than that of a fixed-rate mortgage. However, it can adjust periodically based on market conditions.
    • Adjustment Period: ARM loans have predetermined adjustment periods, such as 1 year, 3 years, 5 years, or longer. After the adjustment period, the interest rate can change, typically annually.
    • Rate Caps: ARM loans often come with rate caps that limit how much the interest rate can increase during each adjustment period and over the life of the loan.
    • Payment Fluctuation: As the interest rate adjusts, your monthly mortgage payment may increase or decrease, depending on the prevailing rates.
  2. Fixed-Rate Mortgage:
    • Interest Rate: With a fixed-rate mortgage, the interest rate remains constant throughout the entire loan term.
    • Stability: The monthly mortgage payment on a fixed-rate mortgage remains unchanged, providing stability and predictability for budgeting purposes.
    • Long-Term Planning: Fixed-rate mortgages are suitable for borrowers who prefer a steady payment amount over the long term and want protection against potential interest rate increases.
    • Limited Rate Risk: Unlike an ARM loan, the interest rate on a fixed-rate mortgage does not fluctuate, regardless of market conditions.

Choosing between an ARM and a fixed-rate mortgage depends on your financial goals, risk tolerance, and housing market conditions. If you prioritize stability and predictability, a fixed-rate mortgage may be preferable.

However, an ARM loan can be advantageous if you plan to sell the property or refinance before the initial fixed-rate period ends or if you expect interest rates to decrease in the future.

When Should You Consider Refinancing Your ARM?

There are several scenarios in which refinancing your Adjustable-Rate Mortgage (ARM) may be beneficial:

  1. Rising Interest Rates: If you anticipate that interest rates will rise significantly in the future, refinancing to a Fixed-Rate Mortgage can provide stability and protect you from potential payment increases.
  2. Expiring Fixed-Rate Period: Many ARMs have an initial fixed-rate period (e.g., 5 years). If your fixed-rate period is ending soon and you expect interest rates to rise, refinancing to a fixed-rate mortgage can help you secure a stable interest rate for the remainder of your loan term.
  3. Financial Stability: If your financial situation has improved since obtaining the ARM, refinancing to a fixed-rate mortgage allows you to lock in a lower interest rate, potentially reducing your monthly payments.
  4. Risk Aversion: If you prefer the peace of mind that comes with a consistent monthly payment and want to eliminate the uncertainty associated with potential interest rate adjustments, refinancing to a fixed-rate mortgage is a suitable option.
  5. Long-Term Ownership Plans: If you plan to keep the property for an extended period, refinancing to a fixed-rate mortgage ensures that your mortgage payment remains steady, making it easier to budget and plan for the future.

It’s important to consider the costs associated with refinancing, such as closing costs and fees, and compare them with the potential savings from a lower interest rate or more stable payments.

Consulting with a mortgage professional can help you determine if refinancing your ARM is the right move based on your specific circumstances.

How To Refinance From An ARM To A Fixed-Rate Mortgage

To refinance from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage, follow these general steps:

  1. Evaluate Your Situation: Assess your current ARM terms, including the remaining loan balance, interest rate, adjustment periods, and any rate caps. Consider your financial goals, interest rate expectations, and how long you plan to stay in the property.
  2. Research Mortgage Options: Research and compare fixed-rate mortgage options from different lenders. Pay attention to interest rates, loan terms, closing costs, and any eligibility requirements.
  3. Gather Documentation: Prepare the necessary documentation, such as proof of income, bank statements, credit history, and property appraisal. Lenders will require this information during the application process.
  4. Calculate Affordability: Determine how much you can afford in terms of monthly payments for the new fixed-rate mortgage. Consider factors such as your income, expenses, and desired loan term.
  5. Apply for the New Mortgage: Submit your application to the chosen lender. Be prepared to provide all required documentation, complete the application forms, and pay any associated fees.
  6. Lock in Your Interest Rate: Once your application is approved, discuss locking in the interest rate for your new fixed-rate mortgage. This ensures that the rate remains unchanged during the loan processing period.
  7. Complete the Loan Closing: Work with your lender to finalize the loan closing process. Review and sign all necessary documents, including the loan agreement and disclosure forms. Pay any closing costs and fees as required.
  8. Pay Off Your ARM: The funds from the new fixed-rate mortgage will be used to pay off your existing ARM loan. Coordinate with your lender to ensure a smooth transition.
  9. Start Making Fixed Payments: Once the refinancing is complete, begin making monthly payments based on the terms of your new fixed-rate mortgage. These payments will remain constant throughout the loan term.

Remember, the specific process may vary depending on the lender, loan program, and your individual circumstances.

It’s advisable to consult with a mortgage professional who can guide you through the refinancing process and provide personalized advice based on your situation.

ARM Refinance Requirements

The specific requirements for refinancing an Adjustable-Rate Mortgage (ARM) may vary depending on the lender and the type of loan you are applying for. However, here are some common requirements you may encounter:

  1. Credit Score: Lenders typically require a minimum credit score for refinancing. The specific score required may vary, but a higher credit score can improve your chances of approval and potentially qualify you for better interest rates.
  2. Loan-to-Value (LTV) Ratio: Lenders will assess the loan-to-value ratio, which compares the loan amount to the appraised value of the property. Lower LTV ratios often result in better refinancing options. Depending on the lender, there may be specific LTV ratio requirements.
  3. Equity in the Property: Building equity in your property is crucial for refinancing. Lenders may require a certain amount of equity to qualify for a refinance. Generally, having at least 20% equity in the property is advantageous.
  4. Debt-to-Income (DTI) Ratio: Lenders evaluate your debt-to-income ratio, which compares your monthly debt obligations to your gross monthly income. A lower DTI ratio demonstrates better financial stability and may improve your chances of approval.
  5. Income and Employment Verification: You will need to provide documentation of your income, such as pay stubs, W-2 forms, or tax returns, to verify your ability to repay the loan. Lenders typically require a consistent and stable income source.
  6. Property Appraisal: A professional appraisal of your property may be required to determine its current value. The lender will use this appraisal to assess the loan amount and LTV ratio.
  7. Documentation: You will need to provide various documents, such as identification, bank statements, tax returns, and information about your current mortgage, to complete the refinancing application.

It’s important to note that these are general requirements, and additional criteria may apply depending on the lender’s guidelines and the specific loan program you are pursuing.

It’s advisable to consult with a mortgage professional or reach out to potential lenders directly to understand their specific refinancing requirements and to get personalized guidance based on your situation.

Final Thoughts

Refinancing from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage can provide stability and peace of mind in your monthly mortgage payments.

By meeting the lender’s requirements, such as credit score, equity, and income verification, you can successfully transition to a fixed-rate loan and enjoy the benefits it offers.


1. Can I refinance my Adjustable-Rate Mortgage (ARM) into a Fixed-Rate Mortgage?

Yes, it is possible to refinance an ARM into a Fixed-Rate Mortgage. Refinancing allows you to convert your variable interest rate to a fixed one, providing stability and predictability in your monthly mortgage payments.

2. What are the benefits of refinancing from an ARM to a Fixed-Rate Mortgage?

Refinancing from an ARM to a Fixed-Rate Mortgage offers several benefits. It provides stability and protection against potential interest rate increases, allows for consistent monthly payments, and offers long-term planning and budgeting. Additionally, it may help you save money if you secure a lower fixed interest rate.

3. When should I consider refinancing my ARM to a Fixed-Rate Mortgage?

There are a few scenarios when refinancing your ARM to a Fixed-Rate Mortgage may be advantageous. These include expecting rising interest rates, the expiration of the fixed-rate period on your ARM, improved financial stability, risk aversion, and if you plan to own the property for an extended period. Consider consulting with a mortgage professional to evaluate your specific situation.


Save $20

On Silver & up plans

Use Coupon Code:

Need help? Call us on
(844) 448-0110