- Who sends it
- Your mortgage servicer or lender
- What it starts
- A countdown to your new payment. The first change is announced 210 to 240 days ahead; later changes usually 60 to 120 days ahead
- Do this first
- Check the new rate against your note: the index plus the margin, within your caps
What this notice is
An adjustable-rate mortgage (ARM) has a rate that can change after closing. Federal rules (Regulation Z) require two kinds of notices for an ARM on your principal home:
- The first-change notice. Before the rate changes for the first time, you must get a separate notice at least 210 days, but no more than 240 days, before the first payment at the new level is due. If that payment is due within 210 days of closing, you get the notice at closing. If the new rate is not known yet, the notice gives an estimate, labeled as one, and says you will get another notice with the actual numbers.
- The regular change notice. Each time the rate changes and your payment changes with it, you must get a notice at least 60, but no more than 120, days before the first new payment is due. Some ARMs that adjust very often, or older ARMs that use a very recent index figure, can be noticed as little as 25 days ahead.
- These notices are not required for an ARM with a term of one year or less, or in a few other cases, such as when you have sent a debt-collector servicer a written request to stop contacting you.
This notice is not a foreclosure notice and does not mean you are behind. It is a warning so you can plan.
What the notice must tell you
- That the current rate period is ending, the date the new rate takes effect, and when future changes are scheduled.
- A table with your current and new interest rate, your current and new payment, and the date the first new payment is due.
- The index your loan uses and where to look it up, and the margin, which is a set number of percentage points added to the index.
- Any limits (caps) on how much the rate or payment can rise at each change and over the life of the loan, and any increase the lender skipped because of a cap that it may add later.
- The loan balance and remaining term expected on the change date, and whether the new payment will fail to pay down principal or will add to the balance.
- Any other change taking effect the same day, such as the end of an interest-only period, and when a prepayment penalty could apply.
- The first-change notice must also give a phone number to call if you cannot make the new payment, explain four alternatives (refinancing, selling, modifying the loan and forbearance), and tell you how to find a housing counselor.
How to check the math
The CFPB explains it this way: index plus margin equals your new rate, subject to any caps. The lender picked the index when you applied, and the margin is set in your loan papers and does not change after closing.
- Find your promissory note or ARM rider. It names the index, the margin, the caps and the change dates.
- Look up the index value the notice used, using the source the notice names, and add your margin. Check the result against any rounding rule in your note.
- Check the caps. The CFPB says a first-change cap is commonly 2 or 5 percentage points, later caps 1 or 2, and a lifetime cap often 5, but your note controls.
- If the numbers do not match, ask your servicer in writing to explain how it figured the rate, and keep a copy. You can also file a complaint with the CFPB.
Not every payment change is a rate change
- Escrow changes. If your payment went up because property taxes or insurance went up, that is an escrow change with its own rules. See the escrow shortage notice page.
- Home equity lines of credit (HELOCs). The ARM notices on this page cover closed-end loans, not HELOCs. For a HELOC, the lender must mail written notice at least 15 days before it changes a term of the plan or raises your minimum payment. Read your HELOC agreement and statements for how your rate moves.
- Modified loans. If your loan was modified, read your modification agreement to see whether the rate can change. The loan modification agreement page explains what to check.
What to do this week
- Write down the date of the first new payment and update any automatic payment so you do not send the old amount.
- Run your budget with the new payment. If it will not work, call your servicer now, before you miss a payment, and ask what help is available. The first-change notice lists the main paths: refinancing, selling, a loan modification or forbearance.
- Talk with a free HUD-approved housing counselor at (800) 569-4287 before you choose. A counselor can compare a refinance offer with staying put.
- If you are thinking about refinancing, compare offers from lenders you contact yourself, and read every disclosure. Do not pay anyone to "guarantee" approval.
- If you already missed a payment, read the late payment notice page and the hardship letter tool.
These notice rules are federal and the same in every state. If you fall behind, your state page explains the foreclosure timeline where you live.
Scams tied to rate increases
News of a higher payment brings offers to "fix" it. Watch for:
- Refinance or "rate reduction" offers that want an upfront fee, a payment by wire or gift card, or your online banking login.
- Anyone who tells you to stop paying your mortgage while they work on a deal. Under federal rules, a mortgage relief company that says this must also warn you that you could lose your home and damage your credit.
- Anyone who tells you to stop talking to your servicer, your housing counselor or your lawyer.
- Anyone who asks you to sign over your deed, or to send money anywhere other than to your servicer or the closing agent named in your papers.
- Anyone who says they are with the government or your lender without proof. Call the number on your own statement or letter to check.
Read how to spot a foreclosure rescue scam. Report fraud at ReportFraud.ftc.gov.
How much time do you have? It depends on your state.
See the foreclosure timeline, deadlines and free local help for the state where the home is.
Common questions
My first-change notice said the new rate was an estimate. Will I get the real number?
Yes. When the first-change notice uses an estimate, it must say you will get another notice with the actual rate and payment. That later notice generally comes 60 to 120 days before the first new payment is due.
I never got a notice and my payment went up. What can I do?
Ask your servicer in writing why no notice was sent and how the new rate was figured. Some loans are exempt, such as ARMs with a term of one year or less. If you think the rule was broken, file a complaint with the CFPB and talk to a housing counselor or lawyer.
Can my rate go down too?
Often yes. The CFPB explains that ARM caps usually limit changes up or down, and some loans set a floor below which the rate cannot fall. Your note says how your loan works.
Does this notice apply to my HELOC?
No. A HELOC is a line of credit with its own notice rules. Check your HELOC agreement and statements, and call the lender with questions.
Keep reading
- Late notice and early intervention letterThis letter is a warning, not a foreclosure. Federal rules make your servicer reach out early and tell you about help. In most cases a foreclosure cannot start until you are more than 120 days behind, so this is the best time to act.
- Breach letter (demand or notice of intent to accelerate)A breach letter says you are in default and gives you a date to catch up. If you do not, the lender can call the whole loan due and move toward foreclosure. Many standard mortgages and deeds of trust require at least 30 days to cure.
- Notice of defaultIn many states that foreclose without a court, a recorded notice of default is the official start of the foreclosure. It is not a sale and not an eviction. It starts a waiting period before a sale can be set, and you can usually still catch up or apply for help.
- Notice of intent to forecloseMany states make the lender send a warning letter before it can start a foreclosure. These letters often give you a set number of days, a cure amount and a list of free counselors. The deadline in the letter matters, so act on it now.
- Lis pendens (notice of pendency)A lis pendens is a public notice, filed in the land records, that a lawsuit or foreclosure affecting your home is pending. It does not mean the home is sold or that you must move. It usually means the court papers are coming or have already been served.
- Foreclosure summons and complaintA summons and complaint means the lender has sued to foreclose. You have a short, firm deadline to respond in writing, often 20 to 30 days from the day you were served. Missing it can let the lender win without your side being heard.
Sources
- 12 C.F.R. § 1026.20(c) and (d), adjustable-rate mortgage rate change notices (eCFR)
- 12 C.F.R. § 1026.9(c)(1), change-in-terms notices for home equity lines of credit (eCFR)
- CFPB: For an adjustable-rate mortgage, what are the index and margin?
- CFPB: What are rate caps with an adjustable-rate mortgage?
- 12 C.F.R. § 1015.4, required disclosures (eCFR)
- CFPB: Find a housing counselor
- CFPB: Submit a complaint
- FTC: Mortgage relief scams