7-1 ARM (Adjustable Rate Mortgage)A 7/1 ARM, or adjustable rate mortgage, allows homebuyers to borrow funds at a low initial rate. This can help a borrower finance a home purchase more effectively. 7/1 ARMs come with lower interest than conventional fixed mortgages for an initial 7 year period at the start of the loan. After this, the rate will increase or decrease depending on the overall market interest rate. A 7/1/ ARM is an excellent choice if you plan to sell your home or refinance before the initial 7 year period ends. If you structure your mortgage plan this way, you’ll be able to take advantage of the initial low rate without worrying about the potential rate increase that may occur after the first 7 years. As with all adjustable rate mortgages, however, be ready for higher payments once the initial seven year period has ended. It’s rare that interest rates adjust downward. They usually increase. Some borrowers aren’t expecting this change and find themselves stuck with high mortgages rates. Contact your lender to help you weigh the financial benefits of a 7/1 ARM. |
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