What does "7/6 Adjustable-rate mortgage" mean?

Definition

A 7/6 ARM provides a fixed, lower interest rate for the first 7 years. Following this, the interest rate changes every 6 months based on the market.

Understanding the 7/6 ARM

The 7/6 ARM comes into play during the loan selection phase of buying a home. It starts with a fixed interest rate for the first seven years. After that, the rate can change every six months. This makes it different from fixed-rate loans which never change. Example: If the initial rate is 3%, it stays at 3% for the first seven years. Afterward, it adjusts based on market rates every six months. It's not a fixed-rate mortgage, so your monthly payments can vary after the initial period. This product appeals to those who plan to move or refinance before the first adjustment period ends.

People Want To Know

Is a 7'6" ARM a good idea?

A 7/6 ARM can be a good option if you plan to stay in your home for the 7 years, as it offers a lower fixed interest rate during that period. After 7 years, the interest rate adjusts every 6 months based on market rates, which could lead to higher payments. Assess your financial situation and market conditions before deciding.

How often does a 7-6 ARM adjust?

A 7/6 adjustable-rate mortgage adjusts every 6 months after the initial 7-year fixed period. once the fixed period ends, the interest rate changes every 6 months based on market conditions.

What are current adjustable mortgage rates for a 7/6 ARM?

The adjustable mortgage rates for a 7/6 ARM depend on current market conditions. Rates adjust every six months based on the index and margin specified in your loan agreement. Contact lenders for current rates and terms.

What is the monthly payment on a $500,000 loan at 7%?

The monthly payment on a $500,000 loan at 7% interest for a 30-year term is approximately $3,327. This calculation assumes a fixed interest rate for the 7 years and does not include property taxes, insurance, or other costs associated with homeownership.

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More From The Mortgage Glossary

Ability-to-Repay rule

The ability-to-repay rule requires lenders to confirm that you can afford to repay a loan before they issue it. They check your income, assets, and credit to ensure you can handle the payments.

Adjustable-rate mortgage (ARM)

An adjustable-rate mortgage, or ARM, has an interest rate that changes over time. It starts with a fixed rate, and after that, the rate can go up or down based on market conditions.

Amortization

Loan amortization is how your mortgage payments are divided between paying off the loan's principal and interest over time. Early on, more of your payment goes to interest, and later, more goes toward the principal.