ARM Reset? How AZM Lending Helps Before the New Payment Hits

By Josh Yoder

If you bought a home with a 7/1 adjustable-rate mortgage in 2020 or a 5/1 ARM in 2022, your reset letter may already be on its way, and the new payment can be hundreds of dollars higher each month. AZM Lending helps borrowers run the reset-versus-refinance math before the first adjusted payment is due. This post shows you the numbers behind the reset wave, what your reset notice legally has to tell you, and how to compare your adjusted payment against a refinance before you decide.

The ARM reset wave in numbers

New data from ICE and Optimal Blue, reported by HousingWire, shows about 148,000 ARMs reset for the first time in 2026, rising to about 186,000 in 2027 and easing to about 155,000 in 2028. Roughly 3.1 million first-lien ARMs are active today, the most in five and a half years, though they are still only 5.6% of active mortgages. More than 90% of ARMs originated since 2022 are still inside their introductory fixed periods, so the reset counts keep building.

The payment jumps are uneven. ICE estimates the median 2020-vintage seven-year ARM will jump about $1,066 a month, or 36%, at reset, while the median 2022-vintage five-year ARM rises about $430, or 22%. The borrowers with the farthest to climb are the ones who locked ARMs when rates were at their lowest: Optimal Blue’s data showed average ARM rates of 3.84% at the end of March 2022, and the 30-year conforming rate ended September 2026 at 7.39%, according to Optimal Blue’s September Market Advantage report.

Refinancing into today’s rates is not automatically painful. The average US 30-year fixed rate tracked by Mortgage News Daily sat at 7.45% on October 14, 2026. For many reset borrowers, a fixed-rate refinance still beats the adjusted payment. The math below shows how.

What your reset notice actually tells you

Federal rules work in your favor here. Under Regulation Z, 12 CFR 1026.20(d), your servicer must send an initial rate adjustment notice at least 210 but no more than 240 days before the first payment at the adjusted level is due. Later adjustments carry a shorter window: at least 60 but no more than 120 days. The notice must show your current and new interest rate, your current and new payment, the index and margin that set the new rate, and the caps that limit how high the rate can climb. In other words, you get the full picture months before the money changes, which is exactly the window you need to shop alternatives.

Reset or refinance? The math

The following example is illustrative. It uses ICE’s reported median jumps and Mortgage News Daily’s published 30-year average, not a quote, and it assumes your reset lands at the median:

• 2020 7/1 ARM: $350,000 original balance at a 3.0% start rate. Payment: about $1,476 a month. If your reset lands at the ICE median, add $1,066: about $2,542 a month.
• After six years of payments, that loan’s balance is roughly $244,000. A 30-year fixed refinance at 7.45% costs about $1,700 a month: roughly $840 less than the adjusted payment, with no future reset risk.
• 2022 5/1 ARM: $300,000 original balance at 4.28%, the average ARM rate Optimal Blue recorded at the end of April 2022. Payment: about $1,481 a month. Add the median $430: about $1,911.
• Refinancing that loan at 7.45% on the remaining $212,000 costs about $1,473 a month: almost payment-neutral, and it removes the reset risk entirely.

Every payment figure here is calculated with the standard amortization formula. The trade-off is real and worth stating plainly: a refinance restarts the 30-year clock, so you may pay more total interest even at a lower monthly payment. Whether that trade makes sense depends on your balance, your index and margin, your caps, and how long you plan to keep the home. Run your own numbers before deciding.

If you are shopping a new ARM instead

ARMs are back in demand. Optimal Blue’s September report put them at 14% of total rate-lock volume, up from 10.5% in August and the highest share in its data series, which dates to 2019. Today’s ARM borrowers are also better protected than the pre-2008 vintage: post-crisis underwriting generally requires qualifying at the fully indexed rate rather than the initial teaser, which is why ICE expects the current rate environment to produce payment shocks, not defaults.

If you are choosing a new ARM, ask three questions before you sign: which index the loan uses, what the margin is, and what the initial, periodic, and lifetime caps are. Those three numbers, not the teaser rate, determine what your payment looks like in year eight. AZM walks borrowers through all three, and we wrote a full comparison in our ARM vs fixed-rate guide.

What this means at AZM

AZM Lending is a mortgage broker, which changes the reset conversation in a concrete way: you are not stuck with one lender’s answer. AZM shops a reset borrower across multiple wholesale lenders and investors. Depending on the case, that can mean a fixed-rate refinance if the math works, a new ARM with a fresh fixed period if you plan to sell within a few years, or expanded-documentation programs for self-employed borrowers and investors whose income does not fit agency boxes. A retail lender can only quote its own rate sheet; a broker can put several lenders’ pricing next to your reset letter and let the numbers decide.

AZM works with borrowers across its multi-state footprint and runs this reset-versus-refinance comparison before the first adjusted payment arrives. The 210 to 240 day notice window gives you the time; the broker model gives you the options. If a temporary payment cushion makes more sense than a full refinance, ask us how rate buydowns can lower the effective payment on a new loan as well.

Talk to an AZM loan officer about your reset date, and bring the notice: it has every number the comparison needs.

Sources

• HousingWire: ARM resets to climb in 2027 but pose limited risk (ICE and Optimal Blue reset data, median payment jumps, ARM share of active mortgages)
• HousingWire: Non-QM lending, ARM usage expand in latest Optimal Blue report (14% ARM lock share, September 2026 rates)
• CFPB: Regulation Z, 12 CFR 1026.20 (initial adjustment notice timing: 210 to 240 days)
• Mortgage News Daily: CPI Puts a Floor Under Recent Rate Rally (30-year fixed average, 7.45%, October 14, 2026)