Convert ARM to fixed? Some adjustable-rate mortgages include a conversion option allowing you to switch to a fixed-rate loan during a specific window. There may be fees, and the conversion rate is typically based on current market rates.
Conversion Options
An ARM conversion clause lets you switch from an adjustable rate to a fixed rate without going through a full refinance. The conversion window is usually limited to the first few years of the loan or during specific periods before an adjustment date. Not all ARMs include this feature, so check your loan documents.
When you convert, the new fixed rate is based on the lender's current rates for fixed-rate mortgages. You do not need to requalify with a new credit check or income verification, though some lenders may still run a soft credit pull.
Fees and Costs
Conversion fees vary by lender. Some charge a flat fee, while others include the conversion cost in the new rate. There are typically no closing costs since it is not a new loan, but read the fine print. A conversion is generally more affordable than a full refinance but may not offer the lowest possible rate on the market.
Alternatives to Conversion
If your ARM does not have a conversion feature, a traditional refinance is the alternative. Refinancing involves new costs and qualification requirements but gives you access to any lender's rates. Compare the total cost of conversion versus refinancing before deciding.
