What does the adjustment date refer to in an Adjustable Rate Mortgage?

The adjustment date in an Adjustable Rate Mortgage (ARM) is specifically the date when the interest rate may change. This is a critical event in the lifecycle of an ARM, as it directly affects how much the borrower will pay in interest charges for their mortgage. Usually, the terms of the mortgage will specify at what intervals these adjustments will occur—such as annually, semi-annually, or for a longer period—depending on the type of ARM.

For example, if a borrower has a 5/1 ARM, the interest rate will remain fixed for the first five years, after which it could change annually based on the index to which the rate is tied. Understanding the adjustment date is crucial for borrowers to anticipate potential changes in their monthly payment amounts and plan their finances accordingly.

Other options refer to different aspects of the mortgage process that do not pertain to the timing of interest rate adjustments. The loan issuance date relates to when the money is first lent, extra payments involve borrower decisions on prepayment and do not affect the mortgage's main terms directly, and the appraisal date is concerned with property valuation rather than loan terms.