How to cope with higher mortgage rates
An even riskier option is a one-year ARM, which has an initial rate that lasts only 12 months before it begins to adjust, usually annually or monthly.
This type of loan typically has a lower rate than a 30-year fixed-rate mortgage. And lately, the initial rates on one-year ARMs have been higher than the initial rates on 5/1 ARMs in Bankrate's weekly surveys.
Thomsen says the savings on a one-year ARM aren't worth the risk.
"We would never recommend that," he says, "You only have 12 payments at a certain rate, and the difference between a seven-year rate and one-year rate is minimal."