October 17th, 2017 1:39 PM by Anne James
Adjustable-rate mortgages (ARMs) allow borrowers to pay lower interest rates on their loan for a set period, after which the rates get changed. The 7/1 ARM means that for seven years the borrower’s interest rate will remain fixed. That’s a clear advantage the 7/1 ARM has over other ARMs with shorter fixed-rate periods.
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However, they also run the risk of potentially higher mortgage payments at the end of the seven years. Whether the rates increase or decrease is determined by
In years when interest rates are low, ARMs are less popular than fixed-rate mortgages. When the opposite is true, borrowers prefer to risk a higher rate in the future in exchange for reduced interest payments now.