Adjustable-Rate Mortgage (ARM) Cash-Out Refinance

What is a cash-out refinance?

In simple terms, a cash-out refinance replaces your current mortgage with another loan that: 

  • Pays off your current mortgage balance
  • Uses your home equity to provide additional funds for other purposes

Adjustable-rate mortgage

An adjustable rate mortgage has an interest rate that is fixed for an initial period, followed by an adjustable rate that may go up or down. 


  • Your interest rate and monthly principal and interest (P&I) payments remain the same for a defined initial period, then adjust annually when that initial period is over. 
  • Loans available in a variety of longer terms. 
  • Includes an interest rate cap that sets a limit on how high or low your interest rate can go at each rate adjustment. 


  • Typically ARMs have a lower initial interest rate than the rate on a fixed-rate mortgage. 
  • The interest rate cap limits the maximum amount your P&I payment may increase or decrease at each interest rate adjustment and over the life of the loan. 
  • May provide flexibility if you expect future income growth or are comfortable with an interest rate and payment that will change. 


  • Monthly principal and interest payments may increase or decrease when the interest rate adjusts. 
  • Your monthly principal and interest payments may change every year after the initial fixed period is over.

To help you determine whether a cash-out refinance can help you with your long-term financial goals, contact your home mortgage consultant.

Talk to us about your refinance goals and options. Get Started

If you are a service member on active duty, prior to seeking a refinance of your existing mortgage loan, please consult with your legal advisor regarding the relief you may be eligible for under the Servicemembers Civil Relief Act or applicable state law.

Principal and interest (P&I) 

The 2 main components of your monthly payment. The principal portion reduces your loan balance, while the interest is your cost for borrowing the principal. Your monthly payments may include taxes and insurance in addition to P&I.

Interest-rate cap

A limit on the amount your interest rate can increase or decrease. Periodic caps limit the increase or decrease from 1 adjustment period to the next. Lifetime caps limit the increase or decrease over the life of the loan.