What your adjustable rate resets to, and whether refinancing beats it
Pick your index and today’s value fills in automatically. Add the margin and caps from your loan, and you get the new rate, the new payment, where the rate can go from here, and a side-by-side with refinancing. Every number you need is on your adjustment notice or your note.
A lot of ARMs written in 2019 through 2021 are reaching their first adjustment now, and the notice that arrives seven or eight months ahead is accurate but hard to act on. It tells you the new rate. It does not tell you what happens at the next adjustment, or whether a refinance at today’s pricing costs more or less over the time you plan to keep the house. This runs both, with the live index, so the decision rests on your numbers rather than on a guess about rates.
— Matt Mergo · NMLS #563819Or talk it through first. Send me the page of your notice that shows the index, margin and caps, and I will check the math and price the refinance side at wholesale. Text · Call · Email. It’s free, and there’s no pitch at the end of it.
Where to find your numbers
Before the first adjustment, your servicer has to send a notice at least 210 and no more than 240 days before the first payment at the new rate is due. It shows how the rate is set, which means the index and the margin, the limits on how far it can move, and an estimate of the new rate and payment. Before each later adjustment you get a shorter notice, 60 to 120 days ahead. If the notice is not handy, your note has the same terms under “Interest Rate and Monthly Payment Changes.”
How the new rate is set
Take the index value from about 45 days before the change date, add your margin, and round to the nearest one-eighth of a percent. That is the fully indexed rate. The caps then limit how far the rate can actually move this time: the first-adjustment cap at the first change, the periodic cap after that, and the lifetime cap measured from your starting rate. The floor limits how far it can fall. Because the index is taken weeks before the change, the rate in your notice is usually very close to what you get.
Which index, and what happened to LIBOR
Conventional ARMs written from 2021 on use the 30-day average of SOFR, published daily by the Federal Reserve Bank of New York, and adjust every six months. VA ARMs, many FHA ARMs and older conventional loans use the one-year Treasury constant maturity, usually its weekly average, and adjust once a year. Loans that were tied to LIBOR moved in 2023 to a replacement index for consumer loans, the Refinitiv USD LIBOR Consumer Cash Fallback, which already includes the adjustment for the switch. That one is licensed, so it cannot be filled in here: take the value from your notice and choose the third option.
Reading the comparison
Comparing monthly payments alone favors whichever loan stretches the balance over more years. So the tool adds up what each path costs over the period you plan to keep the loan, including closing costs and whatever balance is still owed at the end, and reports the month the refinance earns back its costs. If that month falls after you expect to sell or pay off, the payment savings never catch up. If the index path changes the answer, that is worth knowing too, because the adjustments after this one cannot be known yet.
For how the plans, caps and indexes compare in general, see how adjustable-rate mortgages work, and for what to do between the notice and the change date, when your ARM adjusts.
Educational estimate, not a quote, a commitment to lend or a statement of your loan terms. Index values are pulled from the Federal Reserve Bank of New York (30-day average SOFR) and the U.S. Treasury daily par yield curve (1-year, averaged by week), cached for up to six hours, and shown with the date they apply to; your loan uses the value your note specifies as of its lookback date. Payments are principal and interest only. Rounding follows the common nearest-one-eighth rule; your note governs. Forest Hills Mortgage LLC, NMLS #1982611 · Matt Mergo, NMLS #563819. Equal Housing Opportunity.