Have you decided to sell your house within the next 7 years?
In that case refinancing now with a 7/1 Adjustable Rate Mortgage (ARM) from a 30 year fixed would mean a lower interest rate for the first 7 years.
A 7/1 ARM, is a mortgage loan amortized over 30 years:
– the first 7 years start with a very low interest rate
– depending on the particular program the rate will then adjust periodically
(for example every 12 months)
– the new adjusted rates will be based in a particular interest index
(for example the “London Interbank Offered Rate” – Libor) + a margin
– the margin is the same for the life of the loan
(for example 3 %)
– most 7/1 ARM programs have caps, a lifetime cap good for the life of the loan,
and periodic caps, which cap how much the intereste rate can change each
Anyway, if your intention is to sell within 7 years then the lower rates during the first 7 years of the loan, would offset the potential interest rate increases beyond those first 7 years.
Note, there are 1 year, 2 year, 3 year, 5 year, 7 year, and 10 year ARMs.