Current ARM refinance rates

What is an adjustable-rate mortgage refinance loan?

In contrast to a fixed-rate loan, which is a more common mortgage offering, the interest rate on an adjustable-rate mortgage (ARM) changes over time. For a 7/1 ARM, for instance, the introductory rate stays the same for seven years. Then the rate can adjust annually. The standard terms allow the rate on an ARM to rise as much as 2 percentage points at a time. As the interest rate changes, so will your monthly payment.

Should I get a fixed-rate refinance loan or an ARM refinance loan?

ARMs are a smart choice when mortgage rates are high and expected to drop, but in the current turbulent rate environment, they’re not the best choice for most borrowers. They can make sense if you’re planning to move or refinance before the adjustments begin, however.

>>Read more about whether you should refinance your ARM into a fixed-rate mortgage.

ARM refinance pros and cons

As with most financial products, ARMs have their benefits and drawbacks. Here are the key things to know:

Pros:

• It has lower rates and payments early in the loan term
• Borrowers may be able to qualify for a larger mortgage thanks to lower initial payments
• Borrowers may be able to invest their monthly savings
• It offers a cheaper way for borrowers who don’t plan on living in one place for very long to buy a house

Cons:

• Rates and payments can rise significantly over the life of the loan
• Some annual caps don’t apply to the initial loan adjustment, making it difficult to swallow that first reset
• These loans are more complex, so borrowers need to be more active and savvy in managing their accounts

ARM refinance loan FAQs

• How does an adjustable-rate refinance work?

  Similar to a fixed-rate mortgage refi, you’ll want to shop around and make sure you’re getting the best possible deal. You’ll need to verify your financial profile with your lender and will eventually have to sign a mountain of documents at closing.

• What are the requirements for ARM refinance loans?

  Lender requirements vary for all kinds of mortgage applicants, but in general, you’ll get a better deal if you have a higher credit score and strong overall finances.

• What are the different types of ARM loans?

  The most common types of ARMs are also known as hybrid ARMs. These have initial fixed-rate periods followed by a floating rate for the remainder of the loan. Hybrid ARMs include:

  • 3/1 ARM: The first three years have a fixed rate followed by a floating rate for the remainder of the loan.
  • 5/1 ARM: The first five years have a fixed rate followed by a floating rate for the remainder of the loan.
  • 7/1 ARM: The first seven years have a fixed rate followed by a floating rate for the remainder of the loan.
  • 10/1 ARM: The first 10 years have a fixed rate followed by a floating rate for the remainder of the loan.

  Usually, 5/1 ARMs have the lowest interest rate of the bunch. For those who think they’ll refinance or sell within five years, this could be a cost-effective mortgage option.

  Of course, it’s also a gamble. If your income or credit situation changes for the worse, you might not be able to refinance. If you can refinance, you might end up with a higher rate than if you would have gotten a fixed-rate loan in the first place.

• Is there a rate cap on ARM refinance loans?

  Most ARMs have a rate cap, which limits how much your interest rate can go up. There are two types of caps:

  • Period adjustment cap: How much your rate can go up or down within an adjustment period
  • Lifetime cap: Limits rate increase throughout the lifetime of the loan (by law ARMs must have a lifetime cap)

  Keep in mind that a drop in interest rates doesn’t mean your monthly payments will go down (or up) right away. Some lenders may hold on to some or all of the rate decline and move it over to the next adjustment period — referred to as a carryover.

  For example, if your rate cap is 1 percentage point and interest rates went up by 2 percent, your lender can hold onto the “extra” 1 percent and increase your monthly payment in the future even if the index rate hasn’t gone up.

• What is the LIBOR vs. SOFR index?

  The London Interbank Offered Rate (LIBOR) is a benchmark rate that helped inform interest rates on ARMs, among other financial products. Due to limitations that made it unreliable, LIBOR is phasing out and being replaced by the Secured Overnight Financing Rate (SOFR). The difference: With LIBOR ARMs, the adjustment to the rate occurs once per year. With a SOFR ARM, that change takes place every six months. Many banks ceased originating products tied to LIBOR at the end of 2021, but you might still see some LIBOR ARMs advertised on Bankrate for the time being.

Learn more about adjustable-rate mortgages

• Adjustable-rate mortgage resources
• ARM calculator
• ARM loan rates
• Guide to choosing between an ARM and a fixed-rate mortgage

Learn more about specific loan type rates

Loan Type	Purchase Rates	Refinance Rates
The table above links out to loan-specific content to help you learn more about rates by loan type.
30-Year Loan	30-Year Mortgage Rates	30-Year Refinance Rates
20-Year Loan	20-Year Mortgage Rates	20-Year Refinance Rates
15-Year Loan	15-Year Mortgage Rates	15-Year Refinance Rates
10-Year Loan	10-Year Mortgage Rates	10-Year Refinance Rates
FHA Loan	FHA Mortgage Rates	FHA Refinance Rates
30-Year FHA Loan	30-Year FHA Loan Rates	30-Year FHA Refinance Rates
VA Loan	VA Mortgage Rates	VA Refinance Rates
ARM Loan	ARM Mortgage Rates	ARM Refinance Rates
3/1 ARM	3/1 ARM Rates	3/1 Refinance Rates
5/1 ARM	5/1 ARM Rates	5/1 Refinance Rates
7/1 ARM	7/1 ARM Rates	7/1 Refinance Rates
10/1 ARM	10/1 ARM Rates	10/1 Refinance Rates
Jumbo Loan	Jumbo Mortgage Rates	Jumbo Refinance Rates
30-Year Jumbo Loan	30-Year Jumbo Loan Rates	30-Year Jumbo Refinance Rates