Convert My ARM to a Fixed Rate Mortgage

I've lived in my home since 1997. I have an adjustable interest rate. Now that rates are down can I lock in for a fixed rate or do I have to refinance?

3 Answers

Look at your original loan documentation. You may have an ARM Conversion Rider that is attached to your Mortgage or Deed of Trust.

ARM Conversion is the provision in some ARMs that allows you to change the ARM to a fixed-rate loan at some point during the term of your loan. If you do convert your ARM, the new interest rate may be higher than current market fixed rates. If you have this Rider, please review it for specific provisions and conversion periods on your ARM. The conversion option is not a standard feature of an ARM loan and is usually priced higher at closing than a non-convertible ARM.

If you do not have this feature or the time to convert has expired, you will have to refinance. That is not necessarily a bad thing though, there are many great programs out there right now that have great interest rates.

This would depend on who your current loan is held by. Most people do not know that your larger banks have a modification loan. If your ARM is held in their portfolio, you might be able to pay a flat fee to have your ARM lowered.

Chase has this program for their ARMs, but once again, you need to know that you are in their portfolio and if you quailfy, they charge $1500. They run credit, do a automated valuation on the home and then send you out a package.

Most companies do not like to tell people or advertise they have this as making someone refinance is more profitable! I have found that that the government and banks have been doing in the last 4 to 6 months is modifying the loans, the hard part is that most banks sold the security in bulk and in some cases do not know who ownes the actual mortgage.

There is a difference in a mortgage servicer and a company that owns your actual mortgage/note/security.

It depends what type of Adjustable Rate Mortgage (ARM) you currently have. If your current ARM has a "convertibility option" clause in your Note, then you may be able to contact your existing Lender and have the ARM "converted" to a Fixed Rate.

Generally, if your current ARM is a Conventional loan (underwritten to Fannie Mae/Freddie Mac guidelines) and is convertible, you will be offered a Fixed Rate that may be slightly higher than a " market rate" you may see advertised today.

Convertible ARM's usually will convert to Fixed rate at was is called the "Freddie Mac 30/30" rate plus 0.375% - 0.625%. The "Freddie Mac 30/30" is the price of a 30 Year Fixed Rate that will be delivered to Freddie Mac within 30 Days.

If your current ARM loan is not convertible to Fixed, then you would have to refinance the loan to get a Fixed Rate.

Thank you for the question, I hope this answer helped.