I have a 5/1 ARM (2.8% interest rate) that started in May 2016. So I'm in my final year of the fixed rate period. What determines the rate the ARM will go to after the fixed period ends?

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    In the US the lender is required to send a notice of what the new interest rate will be some time in advance of the adjustment. You can check their calculation with the mortgage, but it is likely to be correct. Given the low level of interest rates, you might look into refinancing to a new mortgage. It may give better terms than you have right now. As in 2016, you may have the option to get a long term fixed rate mortgage at slightly higher rates than an adjustable. You have to guess what will happen to interest rates over the long term to know which is best. Commented Jun 13, 2020 at 4:11

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This depends on your mortgage agreement. The rate is generally a published index plus a margin. Exactly which index is used and what the margin is will vary based on lender, or even between loans from the same lender. The only way to know how the rate is determined for your mortgage is to read your mortgage agreement.

In addition to the index and margin, there are generally limits to both how much the rate may change each period, and how much the rate may change overall across the life of the loan.

  • "The rate is generally a published index plus a margin." What is that index? Are there common indexes that are used? Commented Jun 13, 2020 at 22:54
  • It varies by lender, but some examples are US Treasury rates, LIBOR, etc.
    – yoozer8
    Commented Jun 13, 2020 at 23:02

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