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Ready to start your home buying journey? Apply now and get pre-approved for your mortgage.
Purchase Rates
Know the rates, know your options. Start building your homeownership plan today.
Monthly Mortgage Calculator
Get a clear picture of your monthly mortgage payment using your rate, credit score, and down payment information.
Affordability Calculator
Not sure what fits your budget? This calculator factors in your income, debts, and down payment to help you find the right price range.
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Ready to lower your rate or tap into your equity? Apply now and start your refinance journey with confidence.
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Refinance Mortgage Calculator
Wondering how refinancing will affect your monthly payments? See how much you can save.
Cash-Out Refinance Calculator
See how much equity you can tap into. Estimate your new mortgage payment and compare loan options.
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About
7/6 ARM
<p class="MsoNormal">This adjustable rate mortgage offers a very low interest rate for the first 7 years, after which the rate resets.</p>
Benefits
Flexibility
A 7-year ARM loan is one of the best ways to save money, especially for those who expect their earnings to change in the next few years.
Lower Initial Payments
Enjoy lower monthly payments during the first seven years, allowing you to potentially save during this initial period.
Interest Rate Caps
Interest rate caps protect borrowers from major fluctuations in their mortgage payments, limiting the maximum amount the interest rate can be adjusted.
Potential for Rate Decrease
After the fixed-rate period, there's a possibility of rate decreases, which could lead to lower monthly payments.
7/6 Adjustable-Rate Mortgage (ARM) Information
<p>A 7/6 ARM loan has a fixed interest rate for the first 7 years of the term. The principal and interest payments remain fixed for this period. Once the period of 7 years is over, the interest rate changes every six months. These changes will depend on different factors, both external and internal. To better understand the eligibility criteria and program details, you can start by <a href="/apply">speaking to one of our seasoned experts</a>.</p>
Basic Components of 7/6 ARM Loan
<ul><li><strong>Interest Rates:</strong> Fixed for the first seven years, then adjusted every six months.</li><li><strong>Adjustment Interval:</strong> The period during which the rate can change, in this case, every six months after the initial fixed period.</li><li><strong>The Index:</strong> Financial market indexes that affect ARM rates, commonly the Secured Overnight Financing Rates (SOFR).</li><li><strong>The Margin:</strong> A fixed percentage added to the index rate as the cost of lending the funds.</li><li><strong>Interest Rate Caps/Floors:</strong> Limits on how much the interest rate can change.</li></ul>
Understanding ARM Caps
<p>ARM loans often use a 5/1/5 cap structure:</p><ul><li>5: The rate will never increase or decrease more than 5% at the initial adjustment.</li><li>1: After the first adjustment, the rate can never increase or decrease beyond 1% with every adjustment.</li><li>5: Throughout the life of the ARM, no more than a 5% increase or decrease in the rate is allowed.</li></ul>
Is the 7/6 ARM Rate the Best Option for You?
<p>The 7/6 ARM loan may be a viable option if:</p><ul><li>You have no plans to stay in the home for a longer period.</li><li>You expect your financial situation to improve in the coming years.</li><li>You want to take advantage of the 7-year period of lower fixed rates to refinance.</li><li>You can afford to make monthly payments even after the interest rate starts to adjust and reaches the maximum amount.</li></ul>
Pros and Cons of a 7/6 ARM Loan
<p>Before deciding on a 7/6 ARM loan, it's important to consider its advantages and disadvantages.</p>
Pros of a 7/6 ARM
<ul><li><strong>Flexibility:</strong> Ideal for those expecting changes in their earnings in the next few years.</li><li><strong>Lower initial payments:</strong> Lower monthly payments during the first seven years allow for potential savings.</li><li><strong>Interest rate caps:</strong> Protect borrowers from major fluctuations in mortgage payments.</li></ul>
Cons of a 7/6 ARM
<ul><li><strong>Unpredictability:</strong> Borrowers need to prepare for adjustable rates and mortgage payments after the fixed-rate period ends.</li><li><strong>Complex rate structure:</strong> The structure, rules, fees, and payments can be complicated.</li><li><strong>Shorter fixed-rate tenure:</strong> The 7-year fixed-rate period may seem short compared to longer-term options.</li><li><strong>Limitations on interest rate decreases:</strong> Floors put a limit on how low the rates can decrease.</li></ul>