An Adjustable-Rate Mortgage (ARM) can be a good choice if you plan to stay in your home for a short time or if you want more manageable payments upfront. If you find you’ll be living in your home longer, or if your ARM adjusts to a rate that’s higher than current conventional mortgage rates, refinancing to a fixed-rate mortgage may make sense.
Example: The Smiths purchased a home for $200,000 with a 5/1 ARM as they originally intended to sell the property before the initial fixed-period ends. After 3 years, they decided to stay longer and refinanced to a 30-year fixed-rate mortgage.