Refinance your ARM before it adjusts only if today's fixed rate beats where your adjustable rate is actually headed over the years you plan to keep the loan. That is the whole decision. A lot of Arizona homeowners who took 5/1 ARMs in 2021 and 7/1 ARMs in 2019 are getting reset letters right now, and many assume they need to refinance immediately. Some do. Others will find their caps hold the first adjustment below the 7.26% Bankrate national average for a 30 year fixed. Here is how to tell which one you are, whether you live in Scottsdale, Phoenix, or anywhere in the Valley.

How Your New Rate Is Calculated

Your new rate equals the index plus your margin, rounded to the nearest eighth of a point, then limited by your rate caps. Nothing else goes into it. Not your credit score, not today's mortgage rates, not your home's value.

The index for most loans today is the 30 day average SOFR, which the New York Fed publishes daily. It was 3.91% on November 6, 2026. The margin is fixed in your note, usually 2.25% on older loans and 2.75% to 3% on newer SOFR ARMs. Add them and you get the fully indexed rate, which is where your loan wants to go.

The caps decide how fast it gets there. A 5/1 ARM often has 2/2/5 caps, meaning up 2 points at the first change, 2 per year after, and never more than 5 above the start rate. A 5/6 SOFR ARM usually has 2/1/5 caps and adjusts every six months. A 7/1 commonly has a 5 point first cap, which means it can jump all the way to the fully indexed rate in one move.

If your loan started on LIBOR, it switched to SOFR after June 30, 2023. Under the federal LIBOR Act, which the Federal Reserve implemented with a final rule, loans on 12 month LIBOR now use the 30 day average SOFR plus a 0.71513% spread adjustment on top of the original margin. Plenty of homeowners never noticed the change. It matters now.

Three Real Reset Scenarios

Here is what three common ARMs on a $400,000 original loan look like at their first reset in 2026, compared with refinancing the remaining balance into a new 30 year fixed at 7.26%.

Payments are principal and interest only and assume the index stays near today's level. The refinance column restarts a 30 year term, which is part of why it looks cheaper.

The 2021 5/1 owner should not refinance into 7.26% this month. The 2019 7/1 owner probably should.

The 5/1 borrower gets a year at 4.75%, about $400 a month less than a fixed refinance would cost. Locking in 7.26% now throws that year away. The 7/1 borrower jumps straight to 6.875% with no cushion, and the reset payment is already higher than a refinance payment. The 5/6 borrower is close to a coin flip, which makes closing costs and timing the tiebreaker.

Run your own balance and rate in the calculator below. Enter your current balance as the price and set the down payment to 0.

Run Your Own Numbers

When Your Servicer Has to Warn You

You get a written notice 210 to 240 days before the first payment at the new rate. For every later change, the notice arrives 60 to 120 days before the new payment.

Those windows come from Regulation Z, section 1026.20, and the CFPB publishes the rule text. The first notice is an estimate if the index has not been set yet, so the exact number can shift a little. Read it closely anyway. It lists your index, margin, caps, and the new payment, which is everything you need to make the call. The CFPB's comparison of fixed and adjustable loans is a good refresher if the terms are fuzzy.

Seven months sounds like plenty of time. It is not, if you want to shop. Most refinances take 30 to 45 days to close, and you want a margin for an appraisal that comes back late or an HOA questionnaire that sits for two weeks. Start 60 to 90 days before the adjusted payment.

When Refinancing Before the Reset Makes Sense

Refinance before the reset when one of four things is true. If none are, keep the ARM for now and revisit at the next adjustment.

• Your first cap is 5 points. Most 7/1 and 10/1 ARMs can jump straight to the fully indexed rate. If that rate is at or above what you can lock today, the cushion is gone.
• You are keeping the house for years. If you plan to stay five years or more, the cheap first year matters less than the fixed rate for the next 25. Our guide to the refinance break even point in Arizona walks through the timeline.
• You want to pull cash or drop a borrower. If you were going to refinance for another reason within two years anyway, doing it once saves a second set of closing costs.
• The payment shock breaks your budget. A jump from $1,633 to $2,474 over three years is real money. If you cannot absorb it, certainty is worth paying for.

Closing costs on a refinance in Maricopa County usually land between 2% and 3% of the loan. See the line items in our post on refinance closing costs in Arizona. Another option is refinancing into a new ARM. A fresh 7/6 ARM can price below a 30 year fixed and buys you seven more years, which suits homeowners who expect to sell. Our explainer on who should use an adjustable rate mortgage covers that trade.

Watch the rate path too. Our post on the December Fed meeting explains why SOFR tracks the Fed closely while fixed mortgage rates follow the 10 year Treasury. If the Fed cuts in 2027, SOFR falls and your ARM falls with it at the next reset. Fixed rates may not drop as much. That asymmetry is the best argument for keeping a capped ARM a little longer.

What Arizona Homeowners Should Check

Many 2021 ARMs in the Valley went on jumbo homes in Scottsdale, Paradise Valley, and North Phoenix, where buyers chased the lowest start rate. If your balance is still above the 2026 conforming limit of $832,750, your refinance is jumbo, and jumbo pricing varies widely by lender. That is where shopping several lenders pays. As a broker, we compare the loan programs we shop side by side, and our refinance process starts with your note, not a sales pitch.

Equity helps too. Metro Phoenix prices are still above early 2021 levels even after this year's softening, and five years of payments add to that, so many 2021 buyers are below 80% loan to value, which means no mortgage insurance on the refinance. If you are thinking about moving instead, you can browse current listings at Arizona Luxury Property Search or reach our team at Pillar Mortgage Group.

Frequently Asked Questions