What is an adjustable rate mortgage (ARM) adjustment period?

An adjustable rate mortgage (ARM) adjustment period is a period of time between when the interest rate on an ARM is adjusted. This period generally lasts for one year, after which the interest rate is changed based on market conditions. The adjustment period for ARMs varies from lender to lender in California. Generally, adjustment periods are six months, one year, three years, five years, seven years, or ten years. During the adjustment period, the interest rate remains the same; however, after that period, the interest rate may increase or decrease by a certain percentage, depending on the terms of the ARM mortgage. ARM mortgages are popular in California due to their flexibility. For instance, the loan may include an initial fixed-rate period at the beginning of the loan that provides the borrower with a stable interest rate. After the initial fixed-rate period ends, the loan is subject to adjustment periods in which the loan’s interest rate will change. In some cases, the borrower is protected from drastic rate increases due to various rate caps. Adjustment periods are also beneficial to the lending institution. It allows the lender to make a profit over time by adjusting the loan’s interest rate when market conditions change. These fluctuations may be beneficial for the borrower if market conditions improve, but the risk associated with an ARM can be significant if market conditions take an unexpected turn.

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What is an adjustable rate mortgage (ARM) adjustment period?

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