Table of Contents
- How Does a 7 1 ARM Loan Work?
- Is a 7 1 ARM a Good Idea?
- What is the Current Rate for a 7 1 ARM?
- What is the Disadvantage of an ARM Loan?
A 7 1 ARM loan is a type of adjustable-rate mortgage. It has a fixed rate for seven years and then adjusts annually for the remaining term of the loan. The current rate for a 7 1 ARM loan is lower than the rate for a 30-year fixed mortgage.
How Does a 7 1 ARM Loan Work?
With a 7 1 ARM loan, the first seven years of the loan have a fixed rate. After that, the rate can change annually for the remaining term of the loan. The rate is determined by adding a margin to the index rate, which is usually the 1-Year Treasury Constant Maturity rate. The rate can change up or down depending on the index. Borrowers should expect the rate to go up over the course of the loan.
Is a 7 1 ARM a Good Idea?
A 7 1 ARM loan can be a good idea for a borrower who plans to move or refinance within seven years. The fixed rate of the loan makes it easier to budget and plan for the future. Plus, the lower current rate on a 7 1 ARM means the borrower can save on interest over the life of the loan.
What is the Current Rate for a 7 1 ARM?
The current rate for a 7 1 ARM is lower than the current rate for a 30-year fixed mortgage. The actual rate depends on the index rate, the margin, and the borrower’s credit score and other factors. Borrowers should shop around for the best rate for their particular situation.
What is the Disadvantage of an ARM Loan?
The main disadvantage of an ARM loan is that the rate can change over the life of the loan. This means that the borrower’s monthly payments can go up or down depending on the index rate. Borrowers should be prepared for the possibility of their payments increasing in the future.