If you have an adjustable-rate mortgage (ARM), it’s only a matter of time until your interest rate begins to fluctuate, possibly driving your monthly mortgage bill higher. Perhaps you yearn for the peace of mind of a fixed-rate mortgage loan’s more predictable monthly payments.
Below, we cover whether you can refinance an ARM, what the process looks like, and smart reasons to switch to either a fixed-rate mortgage or a new ARM.
- Refinancing an ARM allows borrowers to sidestep potential rate increases, lower monthly payments, or tap into home equity for expenses such as renovations or education.
- Opting for a fixed-rate mortgage offers stability, protection from rising rates, and predictable payments, though it may come with higher initial rates and closing fees.
- Choosing to refinance into a new ARM can be advantageous if you plan to sell or refinance again soon or if rates remain steady, but it comes with the possibility of future rate hikes.
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When Can You Refinance an ARM and What’s Required?
Keep in mind that most lenders require at least six months of seasoning before you can refinance. Some lenders may permit a refinance sooner, while others may require waiting up to 12 months.
This waiting period allows the lender to assess your payment history and ensure it’s consistent and timely. Making payments as agreed upon for at least six months helps demonstrate reliability.
Also, check if your current mortgage includes prepayment penalties, as these can affect the cost-effectiveness of refinancing early.
To qualify for a refinance, most lenders expect:
- Credit score: 620 or higher (700+ for best rates)
- Debt-to-income (DTI) ratio: 43% or lower
- Loan-to-value (LTV) ratio: 80% or lower
- Loan seasoning: Typically 6 months minimum
- Employment history: Stable employment and income
- Cash reserves: Enough to cover several months of mortgage payments
ARM Rates Today
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How we source rates and rate trends
Rates based on market averages as of Dec 02, 2025.Product Rate APR 30-year Fixed Refinance 6.35% 6.37% 5/6 Arm (refinance) 6.06% 6.08% 3/6 Arm (refinance) 5.69% 5.69% 7/6 Arm (refinance) 6.00% 6.03%
Benefits of Refinancing an ARM
Refinancing an ARM can be a smart move for borrowers looking to avoid potential rate hikes before the adjustable period begins.
Here are some ways that refinancing an adjustable-rate mortgage can be beneficial:
Tap home equity: If your property value has climbed, a cash-out refinance can convert some of that equity into cash for renovations, tuition, medical costs, or other needs.
Lock in predictability with a fixed rate: Refinancing into a fixed-rate mortgage can help you secure consistent monthly payments and eliminate the uncertainty of future rate adjustments.
Lower your payment if rates have fallen: If current mortgage rates are lower than when you first took out your loan, refinancing could reduce your monthly payment and free up cash for other financial priorities.
In summary, if you currently have an ARM you want to refinance, you have two choices:
- Refinance into a new ARM
- Refinance into a fixed-rate mortgage loan
Let’s take a closer look at the pros, cons, and steps involved with each option.
Pros and Cons of Refinancing an ARM to a Fixed-Rate Loan
Refinancing your ARM to a fixed-rate mortgage loan offers two key advantages many borrowers prefer: stability and protection against rising rates.
Here’s an example of the cost savings from refinancing from a 5/1 ARM to a 30-year fixed-rate loan:
| Scenario | Loan Type | Loan Amount | Interest Rate | Estimated Monthly Payment | Change in Payment |
| Before Refinance | 5/1 ARM | $300,000 | 7% | $1,996 | — |
| After Refinance | 30-Year Fixed Rate | $300,000 | 6% | $1,799 | Reduction of $197/month |
The main benefit is that your rate will stay the same for the entire term of your new refinance loan, with no adjustments. Fixed housing payments provide real peace of mind.
On the downside, the locked-in rate for a new fixed-rate loan could be higher than the initial rate you pay for an ARM (whether it’s your current ARM that hasn’t yet adjusted or a new ARM you refinance into).
But over the life of the loan, you could pay a lot less in total interest for a fixed-rate loan than an adjustable ARM, although there’s no guarantee: ARM rates can also adjust downward, providing the potential to save more money than a fixed-rate loan would.
In addition, as is true of any refinance option, you’ll pay closing costs by switching from an ARM to a fixed-rate home loan, which typically amounts to 2 to 6% of the loan amount.
Pros and Cons of Refinancing an ARM To Another ARM
Just because your current ARM carries some uncertainty doesn’t mean you have to switch to a fixed-rate loan. Refinancing into a new ARM can sometimes make sense.
Refinancing into another ARM can be beneficial if:
- You plan to sell or refinance again within the next few years.
- You can secure a lower introductory rate and save money during the initial fixed period.
- You anticipate that rates will remain stable or decline in the near future.
Here’s an example of how refinancing into a new ARM could impact your monthly payment:
| Scenario | Loan Type | Loan Amount | Interest Rate | Estimated Monthly Payment | Change in Payment |
| Before Refinance | 5/1 ARM | $300,000 | 4% | $1,432 | — |
| After Refinance | 7/1 ARM | $300,000 | 3.5% | $1,347 | Reduction of $85/month |
Of course, this route involves some risk, as your new ARM will eventually adjust, possibly sending rates higher. If rates rise significantly after the adjustment, you could face much higher payments down the line. It’s a calculated risk that depends on your financial goals and market outlook.
And don’t forget—a refi to a new ARM will still come with closing costs.
How to Refinance an ARM
Here are the steps for refinancing into a new fixed-rate mortgage loan:
- Assess your financial goals and timeline for paying off a new loan.
- Review your credit reports and credit score, and try to up your score to land a better loan offer.
- Gather the necessary documents – including proof of income, tax returns, and credit reports.
- Shop around among multiple lenders and request rate quotes and loan offers.
- Compare each loan offer carefully – sizing up the rates, terms, and closing costs – to find the best deal.
- Choose the right loan offer and term, apply for the loan, and lock in your rate.
- Have your home professionally appraised (if required by the lender) to determine its value.
- Await an underwriting decision.
- Review the loan details and terms carefully at closing, sign the required paperwork, and pay closing expenses.
Check your refinance eligibility today!
Costs to Consider Before Refinancing
Make no mistake: you’ll have to pay your share of closing costs whether you refinance into a new ARM or a new fixed-rate mortgage loan.
Closing costs usually range from 2% to 5% of the loan amount. These may include:
- Application and origination fees
- Appraisal fees
- Title insurance expenses
- Attorney fees
- Recording fees and taxes
For a $300,000 loan, that would be roughly $6,000 to $15,000. Many lenders offer no-closing-cost options by rolling these costs into your loan in exchange for a slightly higher rate.
If refinancing lowers your monthly payment, you can determine your break-even point, the time it takes for your savings to offset closing costs. For instance, if you pay $6,000 in closing costs and save $200 per month, you’ll break even after 30 months. Beyond that point, your new loan produces real savings.
The Bottom Line
Fortunately, you’re not tethered to your current ARM: you can choose to refinance when the time is right, and, ideally, you can save money by shifting to either a fresh ARM or a new fixed-rate mortgage loan with a lower rate and better terms.
But you’ll need to do your homework and forecast future needs carefully to determine which option best suits your situation. Before committing to a new financing offer, think hard about how long you plan to remain in your home, your future job and earning prospects, and where you believe the rate climate is heading.
