What is an adjustable-rate mortgage refinance loan?

In contrast to a fixed-rate loan, the interest rate on an adjustable-rate mortgage (ARM) changes over time. For a 7/1 ARM, for instance, the introductory rate stays the same for seven years, after which the rate adjusts annually. As the interest rate changes, so will your monthly payment. If you’re thinking about an ARM refi, be prepared for these payment swings.

How does an adjustable-rate refinance work?

Similar to a fixed-rate mortgage refi, you’ll want to shop around and make sure you’re getting the best possible deal on refinance ARM rates. You’ll need to verify your financial profile with your lender and will eventually have to sign a mountain of documents at closing.

Is there a rate cap on ARM refinance loans?

Most ARMs have a rate cap, which limits how much your interest rate can go up. There are two types of caps: Period adjustment cap: How much your rate can go up or down within an adjustment period Lifetime cap: Limits rate increase throughout the lifetime of the loan (by law ARMs must have a lifetime cap) Keep in mind that a drop in interest rates doesn’t mean your monthly payments will go down (or up) right away. Some lenders may hold on to some or all of the rate decline and move it over to the next adjustment period — referred to as a carryover. For example, if your rate cap is 1 percentage point and interest rates went up by 2 percent, your lender can hold onto the “extra” 1 percent and increase your monthly payment in the future even if the index rate hasn’t gone up.

Today's Adjustable-Rate Mortgage Refinance Rates

Weekly national mortgage interest rate trends

Current refinance rates

	5/1 ARM refinance	6.25%
	30 year fixed refinance	6.92%

Today's ARM refinance rates

Refinance rates change all the time, driven by factors like the economy, Treasury bond rates and demand. In 2024, adjustable-rate mortgage rates have jumped around in the 6 to 7 percent range. Despite multiple rate cuts by the Federal Reserve starting in September, rates have not fallen significantly. At the time of this writing, ARM rates are slightly higher than 15-year and 30-year fixed mortgage rates.

Lenders nationwide provide weekday mortgage rates to our comprehensive national survey of the most current rates available. The interest rate table below is updated daily. Use these as a guide to what's available, but keep in mind your rate may vary depending on your qualifications and the lender you choose.

Product	Interest Rate	APR
5/1 ARM	6.20%	6.95%
7/1 ARM	6.46%	7.00%
10/1 ARM	6.70%	6.97%

Product	Interest Rate	APR
5/1 ARM	6.17%	6.93%
7/1 ARM	6.48%	7.01%
10/1 ARM	6.72%	6.94%

Rates as of Friday, February 21, 2025 at 6:30 AM

When comparing mortgage offers, both the APR and the interest rate matter. The APR, or annual percentage rate, represents the total cost of the loan, including the interest rate and all fees and points. The interest rate is the amount of interest the lender charges you for the loan, not including any of the other costs.

Here’s what’s often included in the APR:
- Interest rate: This is simply the percentage rate of interest charged for the mortgage.
- Points: A point is an upfront fee you might choose to pay to lower your interest rate. Each point, also known as a discount point, costs 1 percent of the mortgage amount. One point on a $300,000 mortgage, for example, would cost you $3,000 upfront.
- Origination fee: This is a fee — one of many closing costs — many lenders charge for creating or initiating your loan.
- Mortgage broker fees: If you’re working with a mortgage broker on your loan, you won’t pay them directly; rather, they charge the lender for their services. The lender then passes the cost onto you in the APR on your loan.
Bankrate has been the authority in personal finance since it was founded in 1976 as the “Bank Rate Monitor,” a print publication for the banking industry. Bankrate has been surveying and collecting mortgage rate information from the nation’s largest lenders for more than 30 years. Hundreds of top publications, such as The New York Times, Wall Street Journal, CNBC and others, depend on Bankrate as a trusted source of financial information, so you know you’re getting information you can trust.

Learn more: Historical mortgage rates

How to compare ARM refinance rates

Getting the best possible rate on your adjustable-rate mortgage (ARM) refinance can mean a difference of hundreds of extra dollars in or out of your budget each month — not to mention thousands saved in interest over the life of the loan. You won’t know what rates you qualify for, though, unless you comparison-shop. Here’s how to do it:

Consider how long you want your rate to be fixed. ARMs are structured with an initial fixed-rate period, typically five years or seven years (three-year and 10-year ARMs also are available). Once the fixed period ends, your rate adjusts, either up or down, from the introductory rate. If you’re refinancing into an ARM, think about how long you’ll want that initial rate.
Compare mortgage rates. Once you’ve settled on an ARM term, get rate quotes from at least three lenders. Bankrate’s mortgage rate comparison tool can help you find rates from a variety of lenders.
Choose the best refinance offer for you. Consider the APR, which is the total cost of the loan, including the interest rate and other refinance fees. These fees are part of your closing costs. If you plan to change homes before the break-even point — the time when the refinance savings outweigh the closing costs — it might not make sense to refinance.

The most common types of ARMs are also known as hybrid ARMs. These have initial fixed-rate periods followed by a floating rate for the remainder of the loan, such as:
- 3/1 ARM or 3/6 ARM: A fixed interest rate for the first three years
- 5/1 ARM or 5/6 ARM: A fixed interest rate for the first five years
- 7/1 ARM or 7/6 ARM: A fixed interest rate for the first seven years
- 10/1 ARM or 10/6 ARM: A fixed interest rate for the first 10 years
Usually, 5/1 ARMs have the lowest interest rate of the bunch. For those who think they’ll refinance or sell within five years, this could be a cost-effective mortgage option.

Of course, it’s also a gamble. If your income or credit situation changes for the worse, you might not be able to refinance. If you can refinance, you might end up with a higher rate than if you would have gotten a fixed-rate loan in the first place.
The requirements vary depending on the lender and whether you intend to refinance an ARM to another ARM or to a fixed-rate loan, as well as the type of loan you’d like to get. In general, you’ll need to meet the lender’s minimum credit score and equity requirements.

ARM refinance pros and cons

As with most financial products, ARMs have their benefits and drawbacks. Here are the key things to know:

Pros

ARMs come with lower rates and payments early in the loan term.
You could use the monthly payment savings for other financial goals.
If you don’t plan on living in the home for very long, you’ll save money.

Cons

Rates and payments can rise significantly over the life of the loan.
Some annual caps don’t apply to the initial loan adjustment, making it difficult to swallow that first reset.
These loans are more complex, so there’s no “setting and forgetting” — you’ll need to more actively manage your account.

Should I get a fixed-rate refinance loan or an ARM refinance loan?

An ARM can be a savvy choice, but only if you have a plan for when higher monthly payments inevitably kick in. If you don’t plan to leave your home after the ARM’s introductory period, it might be better to refinance to a fixed-rate loan, which maintains the same monthly payment for the life of the mortgage. Here’s more on whether you should refinance your ARM into a fixed-rate mortgage.

ARM refinance loan FAQ

In contrast to a fixed-rate loan, the interest rate on an adjustable-rate mortgage (ARM) changes over time. For a 7/1 ARM, for instance, the introductory rate stays the same for seven years, after which the rate adjusts annually. As the interest rate changes, so will your monthly payment. If you’re thinking about an ARM refi, be prepared for these payment swings.
Similar to a fixed-rate mortgage refi, you’ll want to shop around and make sure you’re getting the best possible deal on refinance ARM rates. You’ll need to verify your financial profile with your lender and will eventually have to sign a mountain of documents at closing.
Most ARMs have a rate cap, which limits how much your interest rate can go up. There are two types of caps:
- Period adjustment cap: How much your rate can go up or down within an adjustment period
- Lifetime cap: Limits rate increase throughout the lifetime of the loan (by law ARMs must have a lifetime cap)
Keep in mind that a drop in interest rates doesn’t mean your monthly payments will go down (or up) right away. Some lenders may hold on to some or all of the rate decline and move it over to the next adjustment period — referred to as a carryover.

For example, if your rate cap is 1 percentage point and interest rates went up by 2 percent, your lender can hold onto the “extra” 1 percent and increase your monthly payment in the future even if the index rate hasn’t gone up.

Additional ARM resources

Meet our Bankrate experts

Written by: Jeff Ostrowski, Principal Reporter, Mortgages

I cover mortgages and the housing market. Before joining Bankrate in 2020, I spent more than 20 years writing about real estate and the economy for the Palm Beach Post and the South Florida Business Journal. I’ve had a front-row seat for two housing booms and a housing bust. I’ve twice won gold awards from the National Association of Real Estate Editors, and since 2017 I’ve served on the nonprofit’s board of directors.

Compare current ARM refinance rates