Adjustment Frequency

Adjustment Frequency

In adjustable-rate mortgages, the rate at which changes to a mortgage's interest rate occur. Usually, the interest rate changes once a year, but some mortgages change rates as often as once a month or as seldom as every five years. The higher the adjustment frequency, the higher the financial risk for the homeowner. For example, if the adjustment frequency is once a month, a homeowner could find his/her mortgage payment increasing every month for five months before it goes down again. This ties up more of the homeowner's income, and increases the likelihood of default.