Having interest rates change during the life of your mortgage is far from being convenient, and so are extremely high interest rates. This is where 7/1 ARM mortgage loans could come in quite handy to say the least. For a set period, you can embrace lower interest rates until they have a chance to fluctuate.
The Basics of 7/1 ARM Mortgage Loans
This approach ensures that your interest rate stays the same for the first 7 years of the mortgage, but once that 7 years is over it will change on an annual basis. As for how much it will change depends on the state of the market as well as your lender.
You can refinance 7/1 ARM mortgage loans which provide you with the opportunity that the interest that’s charged isn’t something that’s will set you back. In fact, this is the most common approach when a 7/1 ARM mortgage is used to fulfill the goals set forth during the financial planning process.
Is a 7/1 ARM mortgage worth it?
It sounds good, 7 years with a low interest rate to finance the home (or any other type of real estate) that you’ve got your eyes on. The question is: is it worth it?
· Don’t worry about your payments changing.
Your monthly payment will always be the same during the 7-year introductory period, which makes it easy to account for in your budget. Most mortgages default when the interest rate changes, but this provides you with solid ground to stand on for 7 years.
· Lower interest rates than fixed-rate mortgages.
Fixed-rate mortgages tend to have high interest rates, and this doesn’t make them an ideal option for most who are looking to buy a new home. With an adjustable rate mortgage that has 7 years before the interest can change, lenders tend to offer lower interest than fixed-rate mortgages to persuade consumers to take them on. This can work to your advantage.
· Refinancing during the 7-year period could be strategic.
In fact, this is the best way to go with this type of mortgage loans. Lenders make the most when the introductory period ends, but there are mortgages out there that can ensure you continue to pay a low interest rate when this time comes.
When you want 7 years before you must pay higher costs for financing, this is a great approach as it provides you with ample time for financial planning. It’s kind of like a chess game but in the world of mortgage loans.