Yes, you can refinance an adjustable-rate mortgage (ARM) at any time, provided you meet lender qualifications and the economic conditions align with your goals. In essence, refinancing an ARM involves replacing your current loan with a new one—either another ARM or, more commonly, a fixed-rate mortgage—to secure better terms, lower payments, or access equity. The RefiGuide posted this article to offer advice for homeowners wanting to refinance an adjustable rate mortgage in 2026.

As of late 2025, with ARMs comprising about 7% of new originations (up from 5% in 2024 due to initial teaser rates around 5.5%), many borrowers are eyeing refis amid projections of stabilizing or slightly declining rates. The process mirrors a new purchase mortgage: Application, credit pull, appraisal, and underwriting, typically closing in 30-45 days.

How to Refinance an Adjustable-Rate Mortgage (ARM)

refinance adjustable rate mortgageTo refinance an ARM, start with your current lender for potential streamlined options, or shop via marketplaces like RefiGuide for multiple quotes.

Key eligibility: Credit score (620+ for conventional, 580+ for FHA), debt-to-income (DTI) ratio under 43-50%, and at least 20% equity for cash-out (though rate/term refis allow less).

ARM refinancing costs average 2-5% of the loan ($4,000-$10,000 on $200,000), rollable into the new balance but increasing interest over time.

In a year like 2026, where economic forecasts point to moderate growth and Fed rate cuts, refinancing could save thousands—but it’s not always “smart.” Let’s explore the mechanics, weigh if 2026 is ideal, and examine three case studies of borrowers who made the switch.

The ARM Refinancing Process: Step by Step

The RefiGuide suggests that refinancing an ARM loan follows a structured path detailed below:

  1. Assess Your Current ARM: Review your adjustment period (e.g., 5/1 ARM fixed for 5 years, then annual changes) and cap structure (2% per adjustment, 5% lifetime). If your rate is set to spike (e.g., from 5.5% to 7.5%), refi urgency rises.
  2. Check Eligibility and Goals: Aim for a 0.5-1% rate drop to break even on costs within 2-3 years. For cash-out, ensure equity (appraised value minus owed) covers needs.
  3. Gather Documents: Pay stubs, tax returns (2 years), bank statements, and credit report. Self-employed? Profit/loss sheets.
  4. Apply and Lock: Pre-qualify without hard pull; lock rate for 30-60 days.
  5. Underwriting and Appraisal: 10-20 days; home must appraise at value.
  6. Close: Sign docs; 3-day rescission for refis.

In 2026, digital lenders like Rocket Mortgage cut timelines to 21 days with e-closings, but appraisals in hot markets (e.g., Austin) add 7-10 days.

Is Refinancing an ARM Smart in 2026?

Refinancing an ARM in 2026 could be a savvy move, but it depends on forecasts and personal circumstances. According to Forbes’ November 2025 analysis, mortgage rates are expected to trend lower in 2026, with fixed income markets projecting further Federal Reserve cuts as inflation eases to 2% and unemployment holds at 4.2%. If your ARM is adjusting upward (e.g., post-teaser period), locking a fixed rate at 6.25% could save $200-300/month on a $300,000 loan, recouping costs in 18-24 months.

Pros of 2026 refi: Lower rates than 2025 peaks (7.5%), potential for cash-out amid 3-4% home appreciation, and streamlined processes with AI underwriting reducing denials by 15%. For ARMs resetting in a declining rate environment, it stabilizes payments against volatility—crucial if Fed pauses cuts amid geopolitical risks.

Cons: If rates fall further (projected to 5.75% by Q4 2026), waiting might yield better deals, but ARMs could adjust down too, negating urgency. Closing costs ($4,000 average) erode short-term savings, and credit pulls ding scores 5-10 points. For borrowers with strong equity (20%+), cash-out adds debt; high DTI (>43%) risks denial.

Overall, if your ARM teaser ends in 2026 and fixed rates dip below your cap (e.g., 7%), refi to fixed is smart—saving $20,000+ in interest over 30 years. But if expecting short-term ownership, an ARM refi might suffice.

Case Study 1: Rate Drop Relief for a Family in Texas

The Rivera family—parents Alex (engineer, $120,000 income) and Sarah (teacher, $65,000)—bought a $350,000 Austin home in 2022 with a 5/1 ARM at 3.5% teaser. By early 2026, their rate adjusted to 7.25%, spiking payments from $1,400 to $2,100/month. Credit: 720 joint FICO; DTI: 38%; equity: 25% ($87,500).

Motivated by Forbes’ forecast of lower rates, they refinanced to a 30-year fixed at 6.375% via Rocket Mortgage in March 2026. Costs: $4,500 (rolled in); new payment: $1,850—saving $250/month. “Forecasts convinced us to lock before resets,” Alex says. Over 30 years, $75,000 interest savings; home value up 4% ($14,000 equity).

Case Study 2: Cash-Out Conversion for an Investor in Florida

Jamal Torres, 45, a Tampa real estate investor with $95,000 income, held a $280,000 ARM on his primary home (adjusted to 7.5% in 2026) and sought $50,000 cash-out for a rental down payment. Credit: 680 FICO; DTI: 42%; equity: 35% ($98,000).

Anticipating modest rate declines per market projections, he refinanced to a fixed 6.5% via Veterans United (VA eligible) in June 2026. New loan: $330,000; payments rose $150/month but stabilized. Cash funded rental yielding 12% ROI. “Refi locked low before potential hikes,” Jamal notes. Savings: $18,000 interest over 10 years; portfolio grew 20%.

Case Study 3: Break-Even Dilemma for a Retiree in California

Retiree Linda Hayes, 68, in Sacramento with $55,000 pension income, had a $220,000 ARM adjusting to 7% in late 2026. Credit: 750 FICO; DTI: 28%; equity: 50% ($110,000).

Weighing Forbes’ lower-rate outlook, she refinanced to 6.25% fixed via Quicken Loans in September 2026. Costs: $3,800 (paid upfront); payments dropped $100/month. Break-even: 38 months. “Forecasts showed stability, so fixed felt safe,” Linda says. Over 15 years, $15,000 savings; peace amid fixed income.

Top 7 Mortgage Lenders for ARM Refinancing in 2025–2026

  1. Rocket Mortgage – Known for strong technology and fast processing, Rocket offers competitive ARM refinance options with clear disclosures and digital tools. While closing costs can be average, its customer satisfaction is high.

  2. CrossCountry Mortgage – Rated as Best Overall refinance lender, CrossCountry provides strong ARM pricing and responsive service. Closing costs are competitive and often negotiated based on credit quality.

  3. New American Funding – Excellent for low ARM refinance rates and flexible underwriting. Their fee structure is transparent, and they often appeal to borrowers seeking lower out-of-pocket costs.

  4. Navy Federal Credit Union – Offers ARM refinance loans with strong member pricing and lower fees for eligible military members and families.

  5. LoanDepot – Provides adjustable-rate refinance options with competitive introductory rates (via 5/1 or 7/1 ARMs) and seasonal rate promotions; closing costs vary by state and loan size.

  6. Chase – A top national bank with broad ARM refinance options and bundled closing cost discounts for existing customers.

  7. Better.com – Online lender with streamlined ARM refinance processes and often reduced lender fees, helping lower overall closing costs.

Current ARM rate context: National average 5/1 ARM refinance rates are around ~5.35%–6.10% APR as of late 2025, making ARMs attractive for shorter-term refinancing.

Refinancing an ARM is feasible and often wise in 2026’s lower-rate trajectory, saving on interest and stabilizing budgets. As the Riveras, Jamal, and Linda illustrate, timing aligns with forecasts for declines—potentially trimming $50,000+ in costs. But calculate break-even, shop lenders (via Credible), and consult advisors. In uncertain times, a fixed refi could be your financial anchor.

Weighing the Opportunity to Refinance an Adjustable-Rate Mortgage (ARM)

An adjustable-rate mortgage (ARM) can be an attractive option when rates are low, but many homeowners eventually choose to refinance to gain payment stability or lower long-term costs. Refinancing an ARM allows you to replace your existing loan with a new mortgage—often a fixed-rate loan or a new ARM with better terms. Understanding when and how to refinance can help you avoid payment shock and improve your overall financial position.

Why Homeowners Are Refinancing an ARM

The most common reason to refinance an ARM is to avoid future rate increases. ARMs typically start with a fixed introductory period (such as 3/1, 5/1, or 7/1), after which the rate adjusts periodically based on an index plus a margin. When the adjustment period approaches, payments can rise significantly. Refinancing before the first adjustment can lock in a predictable monthly payment and protect against market volatility.

Other homeowners refinance to lower their interest rate, shorten the loan term, remove mortgage insurance, or tap equity through a cash-out refinance if they qualify.

When to Refinance an ARM

Timing is critical. Many borrowers refinance 6 to 12 months before the ARM’s first adjustment date. This window gives you time to shop rates, gather documents, and lock a loan before potential payment increases take effect. Refinancing may also make sense if market rates fall, your credit score improves, or your home value increases—each can help you qualify for better terms.

ARM-to-fixed vs ARM-to-ARM refinance

Most borrowers refinance an ARM into a fixed-rate mortgage, such as a 30-year or 15-year loan. Fixed-rate loans offer consistent payments for the life of the loan, making budgeting easier. However, some homeowners refinance into a new ARM with a longer fixed period (for example, moving from a 3/1 ARM to a 7/6 ARM) if they plan to sell or refinance again before the next adjustment.

The right choice depends on how long you expect to keep the home, your tolerance for risk, and current rate spreads between ARMs and fixed-rate loans.

Steps to Refinance an Adjustable Rate Mortgage

  1. Review your current loan terms – Know your adjustment date, index, margin, and caps.

  2. Check your credit and equity – Strong credit and sufficient equity improve approval odds and pricing.

  3. Compare loan options – Evaluate fixed-rate and ARM refinance offers side by side, focusing on APR, fees, and long-term costs.

  4. Get pre-approved and lock your rate – Locking protects you from rate increases during processing.

  5. Complete underwriting and closing – Provide income, asset, and property documentation until the new loan funds.

ARM Refinance Costs and Qualification Considerations

Refinancing an ARM typically involves closing costs of 2% to 5% of the loan amount, including appraisal, title, and lender fees. To decide if refinancing makes sense, compare the monthly savings to the breakeven point—the time it takes for savings to exceed closing costs. Lenders also review debt-to-income ratio, credit score, and property value before approval.

Refinancing an adjustable-rate mortgage can be a smart move if you want payment stability, lower risk, or better loan terms. By refinancing early, comparing options carefully, and understanding your long-term plans, you can turn an ARM into a mortgage that better supports your financial goals.

References

Bankrate. (2025). Adjustable-rate mortgage (ARM) refinance: How it works.

Consumer Financial Protection Bureau. (n.d.). What is an adjustable-rate mortgage (ARM)? 

Freddie Mac. (n.d.). Understanding adjustable-rate mortgages. 

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