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

An adjustable rate mortgage (ARM) adjustment period is a period of time during which an adjustable rate mortgage (ARM) interest rate and associated monthly mortgage payments can change. In North Carolina, an ARM adjustment period is typically 6 months or 1 year. During this period, the lender reviews the current index rate (the rate which the lender charges its customers for a loan) and compares it to the indexed rate (the rate which is used to calculate the ARM interest rate and monthly mortgage payments). If the index rate is different than the indexed rate, the lender may make adjustments to the ARM interest rate and the monthly mortgage payment. The ARM interest rate and payment can change depending on the index rate and other factors. The lender must inform the borrower about any changes to the ARM interest rate or payments at least 45 days before the effective date of the change. This gives the borrower the opportunity to review the change and decide if they would like to accept it or refinance the loan.

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