What to Do When Your Mortgage Rate is Adjusted

There's no need to panic when your mortgage rate is adjusted. Here's why.


Change can be nerve-wracking. There’s a reason those home video shows never seem to run out of footage of brides passing out and grooms tossing their cookies at the altar. While the shows would have you think otherwise, there is no change so scary as the impending adjustment of your adjustable rate mortgage (ARM). Though adjustability sounds like a desirable thing, a goal you might work on with your Pilates teacher, when it refers to your mortgage? Not so much.

To be clear, though, a plain old adjustable loan is not the boogeyman. It’s the interest-only or negatively amortizing ones that incite fear in the hearts of homeowners. With an amortized ARM, your interest rate simply adjusts with the market rates, so your rate and payment fluctuate a bit. Most often, amortized ARMs are used for equity lines of credit, not for first mortgages. With an interest-only or neg-am loan, you might have had a low, low payment for years, which might as much as double when it starts to adjust. These loans were intended to be refinanced, but you might not be able to if you owe more on your home than it’s worth. Can’t refi and your mortgage is about to double? That’s a sticky wicket.

I Know the Feeling. Waiting for your mortgage to adjust is like watching one of those old black-and-white film scenes where two locomotives are chugging along at high speed directly toward each other: something bad is about to happen and you know it, but there’s nothing you can do but watch the train wreck. The difference is that instead of a smashed up pair of engines, we’re talking about your money, your house and your credit, so just watching the wreck is enough to send your acid reflux into overdrive. Anxiety, panic, even terror are all normal reactions to an impending mortgage adjustment.

Your Mindset Reset. So you discover that your interest-only ARM is going to reset shortly. Or maybe you go to the mailbox and find a friendly note from your neighborhood lender 'reminding' you of your mortgage’s upcoming adjustment date. Don’t let the resulting distress get you depressed. Instead, be grateful for the wake up call and view it as an opportunity to take steps to fix your broken ARM, before it really starts to hurt!

Your Drama-Free Real Estate Rx. If your adjustment is drawing near, click over to MakingHomeAffordable.com to see if you might qualify for one of the modification or adjustment programs backed by the federal government. If your loan isn’t eligible, try a regular old refi or, if all else fails, a loan modification you get directly from your bank. Don’t take no for an answer. If your lender won’t play ball, consider hiring a loan mod attorney for help. Gear up to take fixing your loan on as a project and don’t procrastinate -- no fainting or cookie-tossing allowed!

Next Up

Alternatives to the Traditional Mortgage

Figure out if you should sign on or steer clear of these financing trends.

Things to Show Mortgage Lenders

Discover details about the personal, employment and financial information your mortgage broker will request.

What to Know About Your Mortgage to Avoid Foreclosure

Many homeowners who end up in foreclosure say they were unaware of some crucial mortgage terms. These are the seven things you need to know about your mortgage to avoid foreclosure.

What to Do If You Can't Afford Your Mortgage

If you're having trouble paying your mortgage, remember there are options before you concede your home.

How to Avoid Mortgage Default

Take these steps to deal early and openly with loan troubles.

How to Deduct Points From a Refinanced Mortgage or Loan for a Second Home

Some of the best perks of owning a home are the tax breaks. Know what expenses you can deduct, and understand how new laws affect you. If you're currently renting, consider the tax advantages of homeownership. This may be the time to buy a home.

I Can't Afford to Pay My Mortgage

Your mortgage is too high, but you don't want to lose money on your home by selling. What's a homeowner to do? Real estate expert Tara-Nicholle Nelson has the solutions.

How Not to Pay Mortgage Broker Commissions

Read about the insider secret to avoid paying mortgage commissions.

What to Do When You Lose Your Job and Can’t Pay the Mortgage

How one family weathered the storm with the help of real estate expert Tara-Nicholle Nelson.

Mind Your Marriage and Your Mortgage

When it comes to buying a home, married couples have all the advantages. With marriage being an option for more people now, see how it can change a mortgage.

Shop This Look

Found a living space you love in HGTV's Photo Library? Get the look in your own home with products from Wayfair.

Follow Us Everywhere

Join the party! Don't miss HGTV in your favorite social media feeds.