Current 7/1-year Hybrid Adjustable Rate Mortgages (ARMs)
- Rate changes: Fixed rate for seven years, then variable, typically changing at one-year intervals; some have shorter change intervals
- Benefits: Can have lower interest rate than 30-year fixed, qualification may be easier as many are retained by lender
- Alternative Strategy: Consider Hybrid ARM to ameliorate rate and payment risks for a given period, substitute for long-term fixed rate
- Useful for: Purchasing or refinancing when or home sale or refinance is anticipated within seven years
- Consider if: Buying or refinancing with a medium-term time horizon or if lower rate needed to qualify
- When shopping, ask about: A history of the index the loan is governed by, margin and rate caps, especially for first adjustment