What options do borrowers have before their ARM starts adjusting?

Before an adjustable-rate mortgage (ARM) starts adjusting, borrowers indeed have several options to consider, which can include selling their home or refinancing the existing mortgage. Selling the home allows the borrower to pay off the ARM, potentially avoiding future rate increases entirely. Refinancing, on the other hand, enables the borrower to replace the ARM with a new loan—this could be either another ARM or a fixed-rate mortgage, depending on their financial situation and market conditions at the time.

The other choices do not accurately reflect the options available to borrowers before the interest rate on their ARM adjusts. For example, switching to a fixed-rate mortgage might require going through a refinancing process that isn't always immediately available or feasible, particularly if the borrower is under financial strain. Additionally, borrowers do have choices before rate adjustments occur, and being forced to accept current rate changes would not be consistent with the flexible nature of mortgage options available today. Lowering the payment amount is also not typically an option that borrowers can take unilaterally unless they modify the loan, which involves additional steps not always available right before a rate change.