What is a 7/1 ARM?

See if this adjustable-rate mortgage (ARM) is the right loan for you

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Buying a house is a big endeavor. Understanding how different types of mortgages work is key to making the best decision for your financial situation. An adjustable-rate mortgage (ARM) offers a fixed interest rate for a set amount of time, after which the interest rate changes based on the type of ARM. A 7/1 ARM offers seven years of the same mortgage payment before then changing annually.

Key insights

  • A 7/1 ARM is a mortgage loan with a fixed rate for seven years, after which the interest rate changes each year.
  • The fixed rate for the first seven years is typically a lower interest rate than the going rate, offering savings on interest.
  • A 7/1 ARM may be a good choice for anyone planning to refinance in the first seven years or to sell their home before the fixed rate ends.

What is a 7/1 adjustable-rate mortgage (ARM)?

A 7/1 ARM is a type of mortgage with a fixed interest rate for seven years. After this period, the rate changes annually based on the current market rates. The “7” represents the length of time with the first interest rate or the fixed rate. The “1” represents how often the interest rate will change.

Your monthly payments will remain the same for seven years. After that, your mortgage and interest rate will change annually. This means what you paid each month for the first seven years may be higher when the fixed-rate period is over.

Interest rates are fixed for seven years. After that, the interest rate will be adjusted annually based on the current market.

Adjustment interval

An adjustment interval, also known as an adjustment period, is how often the interest rate will fluctuate and a borrower can expect to have a different amount to pay per month on their mortgage. For a 7/1 ARM, this is every year after the initial seven. "ARMs also have limits on how much they can adjust at the initial adjustment, each adjustment after that, and the life of the loan," said Doug Perry, strategic financing advisor at Real Estate Bees.

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Who is a 7/1 ARM best for?

Homebuyers who want a low interest rate and may not plan to stay in the home long-term may be interested in a 7/1 ARM. These types of mortgages typically have a lower interest rate than fixed-rate mortgages. Borrowers do need to be comfortable with unpredictability and some level of risk, as their monthly mortgage payments can increase significantly after the initial seven-year period ends.

Someone who plans to refinance or sell their home may benefit from a 7/1 ARM. Refinancing has closing costs and fees and should be evaluated to see if the savings in interest costs compensate for the fees to refinance.  "The 7/1 ARM might be an advantageous product if the discount is worthwhile," said Shmuel Shayowitz, president and chief lending officer at Approved Funding. He elaborated that understanding the total costs for a refinance is necessary for the borrower to see if it's something they'd want to do six to seven years later.

» MORE: Is buying a house a good investment?

Pros and cons of a 7/1 ARM

Entering a 7/1 ARM agreement can be beneficial for buyers who want to secure a lower, fixed interest rate for seven years. However, your interest rate can go up after your seven-year term, resulting in a higher monthly payment or a costly refinance.

Knowing the advantages and disadvantages of a 7/1 ARM is key to deciding on the best type of mortgage.


  • Seven-year fixed rate
  • Lower rates
  • Good for buyers with short-term plans


  • Mortgage payment can increase
  • Complicated rules
  • Refinancing ARMs can be costly

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    Can I refinance my 7/1 ARM into a fixed-rate mortgage?

    Yes, a 7/1 ARM can be refinanced into a fixed-rate mortgage. Pay attention to current market interest rates so you can refinance when the rates are low.

    What should I consider before choosing a 7/1 ARM?

    When deciding on a 7/1 ARM, it's important to evaluate your financial situation and understand that mortgage payments can increase significantly after the initial seven-year period ends.

    How does a 7/1 ARM compare to other types of ARMs?

    A 7/1 ARM loan means the fixed interest rate lasts for seven years before it fluctuates each year thereafter, whereas other types of ARMs may have a shorter or longer period for either the fixed rate term or the frequency with which the subsequent time periods readjust for interest rate changes.

    Bottom line

    Choosing a mortgage is a big decision. Understanding your risk comfort level, your current income and whether the home is a short-term or long-term situation can guide you on whether a 7/1 ARM is a good option for you. If you plan to sell the home or refinance, a 7/1 ARM mortgage could be a smart choice.

    Article sources
    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
    1. Consumer Finance Protection Bureau, “Consumer Handbook on Adjustable-Rate Mortgages.” Accessed Feb. 28, 2024.
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