What is the most common adjustment interval on an adjustable rate mortgage (ARM) once the interest rate begins to change?

The most common adjustment interval on an adjustable rate mortgage (ARM) is typically one year. This means that after the initial fixed-rate period, the interest rate can be recalibrated annually based on a specific index, which reflects changes in market rates. This annual adjustment allows borrowers to take advantage of potential decreases in interest rates while also exposing them to the risk of increases.

The choice of a one-year adjustment interval is prevalent because it strikes a balance between providing borrowers some stability in their payment amounts while also allowing lenders to adjust to changing economic conditions more promptly. It is essential for borrowers to understand how this yearly adjustment can impact their loan payments over time, particularly if interest rates rise significantly.

Other intervals, such as six months or longer durations like five years or two years, are less common but may exist in specific loan products. While some borrowers might find shorter or longer intervals appealing, the one-year adjustment period offers a widely accepted standard in the mortgage market.