Can you refinance an ARM loan? Discover your options

An adjustable-rate mortgage (ARM) with a low starting rate might seem like a great deal at first. You start paying a fixed, lower rate, and eventually the starting period ends and the mortgage lender can adjust it according to the market.

As the fixed period closes and a higher rate begins, paying more every month might not work for you. Many borrowers wonder: Can you refinance an ARM loan before it adjusts? You can — and in many cases, it’s the right move. By refinancing your ARM, you could lock in today's rates, get more payment predictability, or even potentially lower your monthly costs.

Here’s how refinancing an ARM loan works and how to decide if it's a good idea for your financial goals.

Can you refinance an ARM loan to a fixed-rate mortgage?

You can refinance an ARM loan at any time, just like you can refinance most other types of home loans.

Every ARM starts out with a fixed interest rate for a set period — most commonly 5, 7, or 10 years — before switching to a rate that adjusts every 6-12 months based on market indexes.

ARMs typically come with rate caps. This means your mortgage rates can only increase by a certain amount at each adjustment and over the lifetime of the loan. Homeowners often choose ARMs for their lower initial rates, especially if they plan to move, refinance before the fixed period ends, or pay the loan down quickly.

Qualification requirements for an ARM refinance depend on the mortgage lender. As with any refinancing loan, they'll look at factors like your credit score, debt-to-income ratio, home equity, and employment history. There are also fees involved: You'll have to pay closing costs and potentially a prepayment penalty to your old lender. How soon you can refinance an ARM loan also depends on your lender and the terms of your current loan.

Why refinance an ARM loan?

Here are some of the reasons why refinancing might be the right move:

— Avoid high rates: Refinancing from an ARM to a fixed-rate mortgage takes the uncertainty out of your housing budget. Rather than wondering if next year's adjustment will bump your monthly payment by hundreds of dollars, you get the peace of mind of having the same rate for the rest of the term.
— Adjust to life changes: Many homeowners choose ARMs because they plan to move or pay off their mortgage before the adjustment period. But life happens. Maybe you've fallen in love with your neighborhood or your career has changed. Refinancing realigns your mortgage with updated life plans.
— Match a stronger financial situation: You might also think about refinancing if your financial situation has improved. For example, if your credit score has jumped 50 points since you first got the mortgage, you could qualify for significantly better mortgage rates now. Even a 0.5% rate reduction saves thousands of dollars for long-term loans.
— Access funding: You can also use refinancing as an opportunity to tap into your home equity with a cash-out refinance, swapping your adjustable rate for a fixed one while using the funds for major renovations or other expenses.

Not all mortgages are created equal. When you’re getting ready to refinance, make sure you’re in safe hands.

Better helps homeowners move from unpredictable ARMs to stable fixed-rate loans with an easy-to-use digital platform, with great mortgage rates and no lender fees. The best part? It all happens online, saving you time and energy.

How to refinance an ARM loan

Ready to trade in your adjustable mortgage for something more predictable? Refinancing an ARM loan to a fixed-rate mortgage isn't complicated. Here's how to do it:

1. Check your credit score

Mortgage lenders want to see your financial report card before offering you a loan. The higher your score, the better rates you'll qualify for.

Start by getting a credit report and checking for any errors that might be dragging down your score. A quick fix could save you thousands over the life of your new loan. If your score isn't quite where you want it to be, even small moves like paying down high credit card balances can make a difference in the rates you can get.

2. Run the numbers

Before jumping into a refinance, make sure it's actually going to save you money. Look at what you're paying on your ARM now versus what you might pay with a new fixed-rate mortgage. Don't forget about closing costs and other fees that could boost the price.

To make crunching the numbers easier, try Better's refinancing calculator.

3. Get prequalified with multiple lenders

Shopping around pays off when refinancing an ARM. Each lender has its own terms, and even a small difference in rates can significantly lower the interest. Getting prequalified is usually free and doesn't affect your credit score.

Be careful not to mix up prequalification with preapproval. Prequalification is a quick review of the information you provide to the lender, while preapproval is the next step where the lender verifies that information. Better removes that extra step and allows you to see what you’re pre-approved for in as little as three minutes, with no credit impact. The best part? Once you complete your pre-approval, you’ll see your rates right away where other lenders require you to speak to a loan officer before you can see what you qualify for.

Apply for preapproval with Better in just three minutes. Experience a fast, transparent digital mortgage experience backed by superior customer support.

4. Compare loan offers carefully

Look at the loan’s full picture, not just the interest rate. A slightly higher rate might be better if it comes with lower closing costs.

Pay attention to the loan term, too. Refinancing from a 25-year ARM to a 15-year fixed-rate mortgage might increase your monthly payments but save you a ton in interest over time. And if you're considering another ARM instead of going fixed, make sure you understand exactly how and when your rate could change.

5. Submit your application

Once you've found a winner, make it official by submitting your application. Be prepared with up-to-date paperwork like bank statements and tax returns. The more organized you are, the smoother the process will be.

Required documentation is similar across lenders, but each has its own list of needs. Always check beforehand to make sure you have what you need.

6. Close

The final step is signing the offer. Before closing day, review your closing disclosure carefully, since it's the source of truth for your new loan terms and shows exactly what you'll pay at closing.

At the closing appointment, sign the paperwork to make your new loan official. Your new lender will pay off the old ARM loan, and you’ll be ready to start making payments on the new mortgage.

Better has simplified the refinancing process. Here’s what to expect for your process timeline when refinancing with Better.

What are the risks and benefits of refinancing an ARM loan?

Deciding whether to refinance an ARM isn't always as straightforward as applying for it. Here are the main points for and against:

Benefit: Payment predictability

For many homeowners, the biggest motivator for refinancing an ARM to a fixed-rate mortgage is knowing exactly what their monthly payments will be for years to come. Instead of wondering how interest rates might affect your budget next year (or 10 years from now), you gain the security of a payment that never changes.

Benefit: Simpler budgeting

Fixed monthly mortgage payments make financial planning a lot easier. When housing costs stay the same, you can confidently earmark funds for other goals like retirement savings or college funds.

Risk: Closing costs adding up

Most refinance loans come with closing costs. If these costs are high, they can push the time it takes for your monthly savings to beat the cost of refinancing (your break-even point) further into the future. And if you move before reaching this break-even point, refinancing could actually cost you money.

Risk: Missing out on potential rate drops

When you lock in a fixed rate, you're protected if rates rise, but you won't benefit if rates fall. With an ARM, your rate adjusts with the market in both directions. If interest rates decrease significantly after you refinance to a fixed-rate mortgage, you might find yourself considering another refinance to recover those savings (and paying closing costs all over again).

ARM refinancing costs

Refinancing an ARM comes with costs similar to your original home purchase, though often at a smaller scale.

Closing costs are typically between 2% and 5% of your loan amount and cover services like appraisals, title work, and loan origination. You can also choose a no-closing-costs option, which usually means either a higher interest rate or rolling the costs into your loan balance. If you’re curious about what typical rates are in your area, check out Better Mortgage’s rate tracker.

Don't forget to check your original ARM agreement for prepayment penalties. Some lenders charge fees if you pay your balance off early, which happens with every refinance since your new lender has to pay off your old loan to complete the process.

Should you refinance an ARM loan to a fixed rate mortgage?

Whether the math works out in your favor for ARM refinancing depends largely on your loan's timing. If you secured your ARM when interest rates were much lower than today's, your current rate might still be better than fixed-rate options, even after an adjustment or two.

But there’s no concrete way to know if you should refinance. It’s up to your financial situation and future needs. If you’re unsure, talk to a financial advisor — they’ll have the insights you need to make an informed decision.

Lock in stability with Better

Refinancing an ARM offers predictable payments and protection from future interest rate increases. While ARMs may offer low introductory rates, many homeowners eventually prefer the certainty that comes with a fixed-rate mortgage — especially if they plan to stay in their home for the long haul.

Better makes it easy to refinance your ARM with a fast online application process and competitive fixed rates. With no lender fees and a speedy approval process, you can quickly transition from unpredictable adjustable rates to the security of fixed monthly payments that never change. All you have to do is answer a few questions about you and your property, and you’ll get a comprehensive breakdown and an expert personalized recommendation from Better Mortgage.

Check your ARM refinancing eligibility in just three minutes.