A convertible ARM allows a borrower to change to which type of mortgage?

A convertible ARM, or adjustable-rate mortgage, provides the unique feature that allows borrowers to switch from an adjustable-rate mortgage to a fixed-rate mortgage within a specific time frame or under certain conditions. This option can be very appealing for borrowers who initially choose an ARM due to typically lower initial rates but want the stability of a fixed-rate mortgage if interest rates rise significantly or if they desire more predictability in monthly payments.

This flexibility is a crucial aspect of convertible ARMs, as it offers borrowers a way to hedge against future interest rate increases after they have experienced the benefits of lower initial payments. By switching to a fixed-rate mortgage, borrowers can lock in their rate, providing security and peace of mind regarding their loan's long-term cost.