Debt Management

Time’s Up on Some Adjustable-Rate Mortgages

As adjustable-rate mortgages reset, homeowners face higher payments and tough choices.
Time’s Up on Some Adjustable-Rate Mortgages
A single-family home in Los Angeles. Allison Dinner/Getty Images
Anne Johnson
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For those who took five-year adjustable-rate mortgages (ARMs) in 2021, the day of reckoning is about to take place. Others who have 10-year ARMs also will be scrambling as they both receive letters from their lenders that monthly payments are about to soar.

In the beginning, an ARM typically gives you a lower rate than a fixed mortgage. But this rate lasts for three, five, seven, or 10 years and then the rate adjusts. For those with a 5/1, they have a fixed rate for five years followed by a yearly rate adjustment. Each rate adjustment has the potential to increase the loan payment.

Familiarize Yourself With ARM Terms

When the initial fixed-rate period ends, an ARM rate will adjust at set intervals. This usually happens every six or 12 months.
Anne Johnson
Anne Johnson
Author
Anne Johnson was a commercial property and casualty insurance agent for nine years. She was also licensed in health and life insurance. She went on to own an advertising agency, where she worked with businesses. She has been writing about personal finance for 10 years.