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How to Convert an ARM Mortgage to a Fixed-Rate Mortgage

3 Min Read • 05/20/2024

Adjustable-rate mortgages (ARMs) can initially offer lower interest rates, but they come with the risk of rising rates over time. For many homeowners, the unpredictability of future payments makes converting an ARM to a fixed-rate mortgage an attractive option. This guide will explore the benefits, considerations, and steps involved in making this conversion.

Understanding ARMs and Fixed-Rate Mortgages

An adjustable-rate mortgage typically starts with a lower interest rate compared to a fixed-rate mortgage. However, after an initial period (usually 5, 7, or 10 years), the interest rate adjusts periodically based on market conditions, which can lead to increased monthly payments. In contrast, a fixed-rate mortgage maintains the same interest rate for the entire loan term, providing stability and predictability in monthly payments.

Benefits of Converting to a Fixed-Rate Mortgage

  1. Payment Stability: Fixed-rate mortgages offer consistent monthly payments, helping with budgeting and long-term financial planning.

  2. Protection Against Rate Increases: By locking in a fixed rate, you are safeguarded against future interest rate hikes, which can significantly increase your mortgage payments.

  3. Long-Term Savings: While the initial rate on an ARM may be lower, converting to a fixed-rate mortgage can save you money in the long run if interest rates rise.

When to Consider Converting

  • Rising Interest Rates: If market trends indicate that interest rates are likely to increase, converting to a fixed-rate mortgage can be a smart financial move.

  • End of Initial Rate Period: Converting before the adjustable period begins can prevent your payments from fluctuating.

  • Financial Stability: If your financial situation has improved, you may qualify for better refinancing terms, making it an opportune time to convert.

Steps to Convert Your ARM to a Fixed-Rate Mortgage

  1. Evaluate Your Current Loan Terms: Understand the specifics of your ARM, including the adjustment period, rate caps, and current interest rate.

  2. Check Market Rates: Compare current fixed mortgage rates to your ARM rate to determine potential savings.

  3. Assess Your Financial Situation: Ensure your credit score, income, and debt-to-income ratio are strong to qualify for favorable refinancing terms.

  4. Choose a Lender: Shop around and compare offers from multiple lenders. Consider both your current lender and new ones for the best rates and terms.

  5. Apply for Refinancing: Submit an application with your chosen lender. Be prepared to provide documentation such as proof of income, tax returns, and credit reports.

  6. Close the Loan: Once approved, review the loan agreement carefully. Pay attention to closing costs and ensure they don’t outweigh the benefits of refinancing.

Considerations and Potential Drawbacks

  • Closing Costs: Refinancing can involve significant closing costs, typically ranging from 2% to 5% of the loan amount.

  • Loan Term: Refinancing might extend your loan term, which could increase the total interest paid over the life of the loan.

  • Current Market Conditions: If interest rates are already high, it might be worth waiting for rates to drop before refinancing.


Converting an ARM to a fixed-rate mortgage can provide peace of mind and financial stability, especially in a rising interest rate environment. Carefully evaluate your current loan terms, market conditions, and personal financial situation to make an informed decision. Consulting with mortgage professionals can provide personalized advice to ensure that the conversion aligns with your long-term financial goals.

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