Change Frequency
Definition and meaning of Change Frequency in real estate.
Change frequency is the predetermined schedule that dictates how often the interest rate on an adjustable-rate mortgage can adjust after the initial fixed-rate period ends.
In more detail
When taking out an adjustable-rate mortgage, the interest rate remains fixed for an initial period, which typically ranges from three to ten years. Once that period expires, the rate changes periodically based on a market index and the change frequency specified in the loan agreement.
Common adjustment schedules are annual, semi-annual, or monthly. Borrowers should understand their loan's change frequency, as more frequent adjustments can lead to rapid shifts in monthly payment amounts when interest rates fluctuate.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Common options | Annually, semi-annually, or monthly |
| Applies to | Adjustable-rate mortgages |
| Watch out for | Higher change frequencies can increase monthly payment volatility |
A homebuyer chooses an adjustable-rate mortgage with a change frequency of once per year, meaning the interest rate can adjust annually after the initial fixed-rate period ends.
Frequently asked questions
How does change frequency affect my mortgage payments?
If your mortgage has a high change frequency, your monthly payments can change more often. In a rising interest rate environment, this can cause your monthly housing costs to increase rapidly.
Where can I find the change frequency for my mortgage?
The adjustment schedule is detailed in your original promissory note and the Loan Estimate or Closing Disclosure documents provided by your lender.