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Using an ARM loan to refinance

Laptop showing the word "refinance" on its screen.

While today’s mortgage interest rates are high, an adjustable-rate mortgage (ARM) loan can help you secure the lowest rate in this raising rate environment.

The main feature of an adjustable-rate mortgage is an interest rate that changes (up or down depending on a financial index) over the course of the loan. Although ARM interest rates fluctuate, all ARMs come with a cap or maximum threshold. The caps protect the borrower from large interest rate swings.

Can I use an ARM loan to refinance my mortgage?

Yes, it is possible to refinance a fixed-rate mortgage to an adjustable rate.

When to consider refinancing to an ARM

Before refinancing a mortgage it’s always a good idea to assess your financial situation and see how your mortgage figures in to your plans.

Here are some times when an ARM can be beneficial:

  • If you are planning on selling the home before the ARM’s introductory rate adjusts higher.
  • If you anticipate an income increase in the near future. Having a lower mortgage payment today can relieve financial pressure.
  • If you anticipate a drop in fixed-rate mortgage loans. When fixed rates decrease you can refinance the ARM to a new mortgage.

What is a 5/5 ARM?

All ARMs have a “reset date,” which indicates how often the interest rate changes. Most ARMs adjust annually, however, some adjust monthly, quarterly, at three years or at five years.

Credit Union of Southern California (CU SoCal) offers a 5/5 ARM that features a lower fixed interest rate for the first five years and a five-year reset period (meaning the rate would adjust every five years after).

The advantage of CU SoCal’s 5/5 ARM is its predictable monthly mortgage payments and five-year rate term. Mortgage rates are expected to come down within the next five years and the loan can be refinanced to a new low fixed-rate loan.

Ready to refinance to an adjustable rate mortgage?

Applying for a Credit Union of Southern California ARM is easy for everyone!

You can apply Online, call the CU SoCal Home Loans team at Center at 800.698.7196, or email us at [email protected].