I recently bought a home and took out an adjustable-rate mortgage (ARM). I understand this means the interest rate can change, which can make the payments go up or down. How will I know when my payment amount changes?
You'll get a notice before the interest rate initially adjusts, and before each subsequent interest rate adjustment, letting you know that the payment is changing.
Under federal mortgage servicing law, the creditor or servicer must send you a notice when your payment changes due to an interest rate adjustment. (12 C.F.R. § 1026.20).
What is a creditor? The "creditor" is the owner of the loan. The creditor might be the original lender or a subsequent owner of the loan.
What is a mortgage servicer? Mortgage servicers process loan payments and manage loan accounts on behalf of the owner of the loan.
The first time the interest rate adjusts, the creditor or servicer must send you a notice at least 210 days, but not more than 240 days, before the first payment at the new adjusted level is due.
If your ARM has already reset once, in most cases, you'll get a notification two to four months before the first payment at the new rate is due, assuming the reset will change your payment amount.
The creditor or servicer doesn't have to send a rate adjustment notice in the following situations.