Routing # 256078446
MORTGAGE KNOWLEDGE CENTER
PenFed Mortgage with Confidence
MORTGAGE
Can You Refinance an Adjustable-Rate Mortgage?
What you'll learn: Everything you need to know about refinancing an adjustable-rate mortgage.
EXPECTED READ TIME: 3 MINUTES
September 18, 2024
For the millions of Americans who dream of homeownership, an adjustable-rate mortgage (ARM) can be a great option for opening the door. However, before you reach the end of the initial fixed-rate period, you may find yourself wondering, “Is refinancing my ARM loan to a fixed-rate mortgage a good idea?”
Whether you just moved into your new home, or your ARM is nearing the end of its fixed-rate period, it is important for you to be aware of your refinance options. That way, you can determine the best strategy for your financial goals.
Can you refinance an ARM?
The great news is that you can potentially refinance your ARM. Although the exact requirements you must meet will vary depending on your lender, the process is the same as refinancing most other types of mortgages.
ARM mortgage refinancing options
There are a variety of refinance products available on the market to choose from, including:
-
Rate-and-term refinance: Provides borrowers with the opportunity to change their current mortgage rate, its term, or both.
-
Cash-out refinance: Replaces your current mortgage with a larger home loan, based on your home's equity, in order to receive a cash surplus.
-
Streamline refinance: For borrowers who want to reduce their current interest rate quickly (must currently have an FHA or VA loan).
As important as it is to do your own research, be sure to also reach out to your lender to discuss which refinance options you are eligible for and likely to benefit from.
Why refinance?
Many borrowers who choose an ARM for their home purchase will use refinancing as a strategy to avoid the adjustable-rate period altogether. Though there are a couple different reasons why you may want to consider refinancing. They include:
-
Increasing budget stability and locking in consistent monthly payments
-
Dropping interest rates
-
Avoiding potential rate increases after the ARM’s introductory period
-
Wanting a shorter loan term
-
Tapping into your home’s equity
Your situation is unique, but understanding how you want to benefit from refinancing can help you better determine which option is best for you.
ARM refinance requirements
Every lender will have their own requirements that you must meet to be eligible for refinancing. However, there are some common qualifications that you can expect to see, such as:
-
Occupancy requirements—most lenders will require that you have made at least six payments on your current mortgage
-
Credit score—typically a minimum of 620
-
Debt-to-income (DTI) ratio that is under 50%
-
At least 20% equity
It is likely you will also need another home appraisal to verify it is worth the amount being borrowed.
ARM refinance process
The process of refinancing your ARM is incredibly similar to, if not the same as any other type of refinance. You may even recognize some of the steps from your previous homebuying experience.
Here is what you can expect when you get started:
-
Research and choose a trusted lender who can discuss your options with you.
-
Confirm you are financially ready and fill out your application.
-
Submit all necessary documents, such as pay-stubs, W-2s, and bank statements.
-
Be patient during the review and underwriting process, then close on your new loan.
What factors should you consider before refinancing an adjustable-rate mortgage?
It is usually better to wait to refinance until you can secure a new rate that is 1% less than your current one. Refinancing an ARM can be a fantastic strategy for lowering your rate, changing loan terms, and obtaining more predictable monthly payments.
However, it is important for you to consider your unique situation and what type of refinance will benefit you the most before making the switch to a fixed-rate mortgage. Be sure to contact a reliable lender to explore all of your home loan options.
SIMILAR ARTICLES
When is an Adjustable-Rate Mortgage a Good Idea?
With interest rates rising, you can still get a low rate with an adjustable-rate mortgage. An ARM can give you more buying power, especially in bidding wars.
Everything You Need to Know About ARMs
Getting a mortgage requires understanding the terms. And when it comes to ARM loans, they can be a bit confusing. We break down the basics. Read on.
ARM Loans—What to Expect, Step by Step
Is the loan process different for an adjustable-rate loan? See how an ARM can become yours in 5 easy steps.
ARMS vs. Fixed Conventional Loans
Shopping for a home loan? Find out how to compare adjustable-rate mortgages to conventional fixed-rate loans and see which is the best for you. Read on.
Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.5 discount point, which equals 1.5 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.25 discount point, which equals 1.25 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.375 discount point, which equals 1.375 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.75 discount point, which equals 0.75 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
©2026 Pentagon Federal Credit Union