7-year ARM refinance rates | U.S. Bank (2024)

FAQs

What are current 7 year ARM rates? ›

You can refinance an adjustable-rate mortgage (ARM) just like you could with any other type of mortgage. The option to refinance could make an ARM appealing if you're looking to buy a home and want to start with the lower rate—and monthly payment—that ARMs can offer, but you're worried about future rate increases.

7/1 ARMs are a type of adjustable-rate mortgage — one of the most popular, in fact. They may be a good fit for borrowers who plan to stay in their home for only a few more years, or who expect interest rates to fall over time.

Yes, you can refinance an adjustable-rate mortgage, and it's just as easy as refinancing any other loan. By refinancing, the borrower is replacing their existing loan with a new, updated loan – usually a fixed-rate mortgage.

Most ARMs adjust every six or 12 months. If interest rates go down, an ARM's rate can go down as well. This makes ARMs an appealing option if you think rates will trend lower in the years ahead. At the same time, if interest rates increase and the ARM's rate adjusts higher, you would need to cover the difference.

Initial interest rate: An ARM typically has a lower initial interest rate and monthly payment than a fixed-rate loan. Interest rate over time: After the ARM's initial rate period, the rate and monthly payment can rise (or fall). If it increases, you could wind up with an unaffordable monthly payment.

You might have to pay a prepayment penalty if you sell or refinance. If you do decide to refinance your adjustable-rate mortgage to get a lower interest rate, you could be hit with a prepayment penalty, also known as an early payoff penalty.

For a 7/6 ARM, the introductory period is 7 years, and then once that expires, the interest rate can adjust every 6 months. Keep in mind, not all ARM loans may adjust downward even if market movement would indicate it should do so.

You can pay off an ARM early, but not without some careful planning. The difficulty is that every time the interest rate changes on an ARM, the mortgage payment is recalculated so that the loan will pay off in the period remaining of the original term.

Your monthly payments might increase: The main disadvantage of an ARM loan is the uncertainty associated with future interest rate adjustments. If market rates rise, your monthly payments could increase within the caps described previously, something you will need to be prepared for.

How is a $50,000 home equity loan different from a $50,000 home equity line of credit? ›

The line-of-credit arrangement also means you'll only pay interest on the amount you borrow, at least initially. With a home equity loan, you'll be responsible for interest on the entire loan balance, even if you don't use all the funds.

ARMs gain popularity when their introductory interest rates are lower than those for fixed-rate mortgages. The resulting smaller monthly payments give borrowers more homebuying power. But the rate and monthly payment on an ARM have the potential to rise, which could make the payments difficult to afford.

Refinancing can be done for many reasons, but switching from an adjustable-rate mortgage (or ARM) to a fixed-rate mortgage is one of the most common. The general rule of thumb is that refinancing to a fixed-rate loan makes the most sense when interest rates are low.

Absolutely. But the ARM refinance only makes sense if it helps you toward your specific financial goals. Compare rates and crunch the numbers to see if refinancing your adjustable-rate mortgage is right for you.

7/1 ARM: With a 7/1 ARM, your interest rate will remain fixed for 7 years. It will then adjust once every year. 7/6 ARM: With the 7/6 ARM, your initial interest rate remains fixed again for 7 years. But after this period ends, your rate will adjust every 6 months.

ARM loans have rate caps, a ceiling for how high your interest rate can go once the introductory fixed-rate period ends. A 5/1 ARM might be right for you if you plan to sell your home or refinance before the initial fixed-rate period expires.

A 10/1 adjustable-rate mortgage has a fixed interest rate for the first 10 years, then it changes annually for the remainder of the 30-year term. The interest rate on a 10/1 ARM is composed of a margin rate and an index rate, which can cause it to rise or fall depending on market trends.