Convertible ARM
An adjustable rate mortgage (ARM) that can be switched to a fixed rate mortgage during a specific period
Some lenders offer convertible ARMs so that you can switch to a fixed rate mortgage in the event interest rates get low enough that you want to keep the lower rate for the life of the loan. The rules vary from lender to lender, but often you need to make the change between the first and fifth year of the loan. You should note that your initial interest rate will be higher than a normal ARM, and to convert, you will have to pay a fee that runs between $250 and $500. Each lender uses a different formula to calculate the converted fixed rate, which is also often higher than overall market rates.