What is a 7-Year ARM?

What is a 7-year ARM?

A 7-year ARM is an adjustable rate mortgage, offering a lower fixed interest rate for seven years. You will have a fixed principle and interest payment for the first seven years of the term; then the rate can adjust based on the then-current market.

Why is a 7-year ARM popular with rising rates?

ARMs are popular when rates are rising. Taking out a mortgage loan with a fixed lower rate, for an introductory period helps make a home purchase more affordable despite the environment.

What makes a 7-year ARM a good choice?

ARMs are particularly beneficial for buyers who plan to sell or refinance their home before the seven-year fixed rate period ends. Should interest rates decrease in the future, you may be able to refinance your ARM into a lower fixed rate mortgage with no prepayment penalties.

How do 7-year ARMs compare to other mortgage rates?

7-year ARMs tend to have a lower initial interest rate than traditional 15-year or 30-year fixed-rate mortgages. After the initial seven years, the interest rate can adjust according to the then-current market rates. Most 7-year ARMs have a cap on how high, and how low, an interest rate can go. This will be outlined in the mortgage agreement.

What do I need to consider when shopping for a 7-year ARM?

• Will you be maxing out your monthly budget with the 7-year initial rate?
• Are mortgage interest rates rising now?
• What is in the cap on the interest rate after the 7-year period is over?
• How long do you plan to live in this home?

Can I refinance my current mortgage to a 7-year ARM?

If you have a 15-year or 30-year fixed rate mortgage, and plan on selling your home within the next seven years, a 7-year ARM may be an excellent choice for you. You may lower your payments until you sell your home.

A 7-year ARM can be an advantageous way to finance a home purchase, especially in a rising-rate environment.

Check out the 7-year ARM

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