How does a 7/1 ARM compare to other ARM terms?

A 7/1 ARM has a longer introductory fixed-rate period than a 3/1 or 5/1 ARM. Because of this, it also typically has a higher rate, though it also has a lower rate than a 10/1 ARM. Otherwise, it functions similarly, except for the fixed-rate period lasting seven years instead of three, five or ten years.

Are there rate caps on 7/1 ARM loans?

Yes, 7/1 ARMs come with rate caps, which limit how much a payment can increase. These caps include: A periodic rate cap: Limits how much the interest rate can change from one period to the next. For a 7/1 ARM, this cap is for every year. A lifetime rate cap: Limits how much the interest rate can rise over the life of the loan. A payment cap: Limits the amount the monthly payment can rise over the life of the loan in dollars, rather than how much the rate can change in percentage points.

What are the requirements to get a 7/1 ARM loan?

Adjustable-rate mortgages have similar loan requirements to many fixed-rate mortgages. These include: Credit score: 620 for a conventional loan, 580 for an FHA loan Debt-to-income (DTI) ratio: 50 percent or less Down payment: 5 percent for a conventional loan, 3.5 percent for an FHA loan

How does refinancing a 7/1 ARM work and when is it a good idea?

You can refinance your 7/1 ARM by contacting a lender and applying for a new loan. Many people with ARMs choose to refinance to a fixed-rate loan before their rate adjusts. Like shopping for your original mortgage, comparing offers from multiple lenders can help you find a good deal. Also, like when you got your original mortgage, you’ll have to submit documentation, get an appraisal and pay for closing costs when refinancing.

Who should consider a 7/1 ARM loan?

There are a few situations where getting a 7/1 ARM could make sense. For example, you might consider this type of loan if you plan to sell your house or refinance within the first seven years. You could also think about getting a 7/1 ARM if you expect your income to increase before the first rate adjustment — that way you could afford potentially higher monthly payments.

Compare Today's 7/1 ARM Rates

What is a 7/1 ARM loan?

A 7/1 ARM is a type of mortgage with a fixed interest rate for the first seven years of the 30-year term. After that, the interest rate is variable and adjusts either up or down annually until the term ends.

It’s important to think about your financial situation and what your goals are when considering an ARM. Here’s when a 7/1 ARM may be a good idea:

You’re planning on moving within seven years.
You’re planning to refinance before the seven years are up.
You expect your income to go up before the ARM adjusts.

Consider these pros and cons when making your decision:

Pros of a 7/1 ARM

Lower introductory rate and monthly payments: An ARM often comes with a lower initial interest rate than that of a comparable fixed-rate mortgage, giving you lower monthly payments for the loan’s fixed period.
Monthly payments might decrease: If 7-year ARM rates are lower at the time your ARM adjusts, your monthly payment could fall. Note that some ARMs have floor rates to limit how far the rate can decrease.
Good for short-term: An ARM can be appealing to those who want to sell before the rate adjusts, or who will plan to put rate savings into extra payments toward the principal.

Cons of a 7/1 ARM

Monthly payments might go up: If rates are higher after the intro period than when you took your loan out, your payments will increase.
You’ll need to plan for rising rates: If you plan to hold onto the loan after the first adjustment, you’ll need to budget for potential upward adjustments every year.
More complicated to prepay: Because of how ARM interest rates are calculated, paying extra each month won’t significantly shorten your loan term, unlike with a fixed-rate mortgage. Instead, prepaying will affect your monthly payment more.

How does a 7/1 ARM work?

Adjustable-rate mortgages tend to start with lower interest rates than their fixed-rate counterparts, so a borrower could qualify for a bigger mortgage because the payments will be lower, at least to start out.

After seven years, the interest rate on a 7/1 ARM adjusts annually. That can mean big changes to how much interest accrues, how much you owe and how much you have to pay every month.

The variable rate on an ARM is based on a benchmark, typically the Secured Overnight Financing Rate (SOFR). This rate fluctuates based on such factors as what’s happening in the global economy and how the Federal Reserve and other central banks are responding to those trends.

Your rate can’t balloon out of control, however. ARMs have caps, so your rate can only go up to a certain limit.

How to compare 7/1 ARM rates

Step 1: Strengthen your credit score - Before you start looking for a 7/1 ARM, give your finances a checkup, and improve your credit score if needed.
Step 2: Determine your budget - A 7/1 ARM can have a high monthly payment. You’ll need a good handle on how much house you can afford.
Step 3: Know your mortgage options - Before deciding on a 7/1 ARM loan, research different types of mortgages to make an informed decision.
Step 4: Compare rates and terms from several lenders - Rate-shop with at least three different banks or mortgage companies.
Step 5: Read lender reviews - Find out what people have to say about a lender before choosing it.
Step 6: Get preapproved for a mortgage - Getting a mortgage preapproval is the only way to get accurate loan pricing for your specific situation.

7/1 ARM loan FAQ

A 7/1 ARM has a longer introductory fixed-rate period than a 3/1 or 5/1 ARM. Because of this, it also typically has a higher rate, though it also has a lower rate than a 10/1 ARM. Otherwise, it functions similarly, except for the fixed-rate period lasting seven years instead of three, five or ten years.
Yes, 7/1 ARMs come with rate caps, which limit how much a payment can increase. These caps include:
- A periodic rate cap: Limits how much the interest rate can change from one period to the next. For a 7/1 ARM, this cap is for every year.
- A lifetime rate cap: Limits how much the interest rate can rise over the life of the loan.
- A payment cap: Limits the amount the monthly payment can rise over the life of the loan in dollars, rather than how much the rate can change in percentage points.
Adjustable-rate mortgages have similar loan requirements to many fixed-rate mortgages. These include:
- Credit score: 620 for a conventional loan, 580 for an FHA loan
- Debt-to-income (DTI) ratio: 50 percent or less
- Down payment: 5 percent for a conventional loan, 3.5 percent for an FHA loan
You can refinance your 7/1 ARM by contacting a lender and applying for a new loan. Many people with ARMs choose to refinance to a fixed-rate loan before their rate adjusts. Like shopping for your original mortgage, comparing offers from multiple lenders can help you find a good deal. Also, like when you got your original mortgage, you’ll have to submit documentation, get an appraisal and pay for closing costs when refinancing.
There are a few situations where getting a 7/1 ARM could make sense. For example, you might consider this type of loan if you plan to sell your house or refinance within the first seven years. You could also think about getting a 7/1 ARM if you expect your income to increase before the first rate adjustment — that way you could afford potentially higher monthly payments.

Additional 7/1 ARM loan resources

Meet our Bankrate experts

Written by: Andrew Dehan, Writer, Home Lending

I’ve covered mortgages, real estate and personal finance since 2020. At Bankrate, I’m focused on all of the factors that affect mortgage rates and home equity. I enjoy distilling data and expert advice into takeaways borrowers can use. Prior to Bankrate, I wrote and edited for Rocket Mortgage/Quicken Loans. My work has been published by Business Insider, Forbes Advisor, SmartAsset, Crain’s Business and more.

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