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

rate adjustment

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.