What are 7-1 ARM Loans?
7-1 ARM loans are a type of mortgage loan with a fixed rate for the first seven years and an adjustable rate for the remainder of the loan term. ARM loans are referred to as adjustable-rate mortgage loans. Refinancing with a 7-1 ARM loan can be a strategic opportunity for homeowners, specifically those looking to sell in seven years. For the first seven years of the homeowner’s loan, they will pay a consistent and fixed interest rate. After the seven years have passed, homeowners will pay an adjustable interest rate.
7-1 ARM loans have a signifiant advantage compared to loans with a shorter period of fixed interest. Longer fixed rate periods can be beneficial for homeowners. It is important to consult with a reputable mortgage lender for more advice on refinancing with a 7-1 ARM loan. A reputable mortgage lender or advisory service will be able to advise on caps, indexes and margins. It is important for borrowers to understand these terms when looking to refinance with a 7-1 ARM loan.
The Benefits of 7-1 ARM Refinanced
- Lower Interest
Homeowners that refinance with a 7-1 ARM will experience lower interest rates- especially for the first seven years of their mortgage. Most homeowners refinance for lower interest rates. It is best to refinance when interest rates are low in your area. Also, if your credit score significantly improves, you will also be eligible for lower interest rates.
- Profitable for Selling Home
7-1 ARM loans are great for homeowners looking to sell within seven years. This allows homeowners to significantly save on their interest and put those funds towards other expenses. This enables homeowners to sell their home before the adjustable rate begins. Adjustable rates are less predictable compared to fixed loan rates and have margin for fluctuations.