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Most mortgages, including FHA loans, require at least 3 or 3.5% down. And VA loans and USDA loans are available with zero down payment. But if you can put 10, 15, or even 20% down, you might qualify for a conventional loan with low or no private mortgage insurance and seriously reduce your housing costs.

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• With shorter terms, you’ll usually get a lower interest rate and total interest costs, but a higher monthly payment.
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• „Loans with 20-year terms are more popular with refinances than purchases,” says Joel Kan, director of economic forecasting for the Mortgage Bankers Association in Washington, D.C.
• The type of loan you choose depends on your financial goals and housing needs.
• As this involves a different rate source and methodology, the averages will not directly align with those we published prior to May 1, 2024.
• When interest rates are low (as they were after the global recession was followed by many rounds of quantitative easing) home buyers have a strong preference for fixed-rate mortgages.
• DTI requirements vary depending on the type of loan and a lender’s underwriting requirements.
• If it’s only been a few years since you took out a 30-year mortgage, you might not be ready to refinance.

To assess mortgage rates, we first needed to create a credit profile. This profile included a credit score ranging from 700 to 760 with a property loan-to-value ratio (LTV) of 80%. With this profile, we averaged the lowest rates offered by more than 200 of the nation’s top lenders. These rates represent what real consumers will see when shopping for a mortgage.

Pros of an adjustable-rate mortgage (ARM):

Since a lender sets rates based on the risk they may take, borrowers who are less creditworthy or have a lower down payment amount may be quoted higher rates. In other words, the lower the risk, the lower the rate for the borrower. They assume you have a FICO® Score of 740+ and at least 25% equity, that the loan is for a single-family home as your primary residence and that you will purchase up to one mortgage point. To learn whether refinancing to a 20 year term makes financial sense to your circumstances, speak with a qualified lending professional today. If you could obtain a lower interest rate, and the lifetime savings in interest outweigh any refinance costs, then a refinance could set you on an accelerated path to becoming mortgage-free. As illustrated above, you will have saved roughly $119,600 ($604,768 less $485,167) in total interest by opting in for a 20 year fixed mortgage.

Mortgage – Purchase Rates

A home insurance policy can help cover unexpected costs you may incur during home ownership, such as structural damage and destruction or stolen personal property. Coverage can vary widely among insurers, so it’s wise to shop around and compare policy quotes. Fixed-rate loans can be good for people who know they’ll be in their homes long term. 20 year fixed mortgage rates ARMs may be a good option for people who don’t expect to stay in a home long, or who are confident they’ll be able to refinance into a fixed-rate loan when the introductory rate ends. ARMs tend to have introductory interest rates that are lower than fixed rates. But when the introductory period ends, the rate can move based on market factors.

• For starters, the monthly payments of a 20 year mortgage are more affordable than a 15 year option.
• For products indicated as a jumbo (e.g. 30-year fixed jumbo rate), displayed information follows the same assumptions as a conventional loan but set at loan above the conforming limit.
• Emergency actions by the Federal Reserve helped push mortgage rates below 3% and kept them there.
• While 30-year refis are the most popular, there may be other options available to you.
• The issuance of a preapproval letter is not a loan commitment or a guarantee for loan approval.
• With an adjustable-rate mortgage (ARM), the interest rate may change periodically during the life of the loan.
• A shorter term means your balance is spread over a shorter period of time, making your monthly payments higher.

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The interest costs are much higher, but if you need flexibility in your monthly costs, a 30-year mortgage may make more sense for you. A 20-year fixed mortgage is a mortgage that is repaid over a term of 20 years at a fixed interest rate. It usually has a lower interest rate than a 30-year fixed mortgage –– up to one percentage point –– but higher than a 15-year fixed-rate mortgage. Mike Schmidt is Credible’s senior manager of mortgage operations and is a licensed mortgage loan originator in 50 states. Mike has spent 18 years in the industry, working at various financial institutions.

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For example, if you are buying a property with a purchase price of £250,000, with an 80% LTV mortgage, you’ll borrow £200,000. You will then need to provide the remaining £50,000 (20%) yourself as a deposit. By choosing an 80% LTV mortgage and putting down a 20% deposit, you can access more mortgage options and cheaper interest rates. Before joining Bankrate in 2020, I spent more than 20 years writing about real estate and the economy for the Palm Beach Post and the South Florida Business Journal. I’ve had a front-row seat for two housing booms and a housing bust.

• A 30-year mortgage, on the other hand, has a lower monthly payment.
• The views expressed in this article do not reflect the official policy or position of (or endorsement by) JPMorgan Chase & Co. or its affiliates.
• This website is using a security service to protect itself from online attacks.
• Credible mortgage rates reported here will only give you an idea of current average rates.
• Rate assumes a $300,000 loan amount, 80%LTV with a credit score of 740+.

What is the benefit of refinancing from a longer term to a 20 year fixed?

There is actually something called a 20-year mortgage that allows you to get a little bit of the best of both worlds. Pearl Hawaii’s 20-year mortgage loan option provides benefits over other mortgage loan types. A key factor when choosing between these two types of loans is recognizing how long you plan to live in your home. If you intend on staying in the home for just a few short years before selling, then an adjustable rate loan could be your best bet.

Should you refinance to a 20-year mortgage?

The mortgage payment may continue to rise at the discretion of the financial institution. However, variable loans may be attractive with low starting rates enabling first time homebuyers to get into a starter home. If the loan applicant realizes the risks and has plans to either refinance, move or pay off the loan before an increase they may be a valid choice.

Mortgage rates by loan term

As a result, a 15‑year mortgage has a lower interest rate than a 30‑year mortgage. According to Richards, many people who have had their mortgage for eight years likely refinanced between 2019 and 2021, when rates were much lower. In contrast, those considering refinancing now are often more recent buyers. Explore conventional mortgages, FHA loans, USDA loans, and VA loans to find out which option is right for you.

Benefits of a Fixed-Rate Mortgage

According to Freddie Mac, this is the most popular type of mortgage, with almost 90% of homeowners opting for a 30-year term. A 20-year mortgage loan comes with a lower interest rate, which results in a reduced expense for the buyer over the life of the loan. Since the loan is shorter sometimes the payments are higher, but this is dependent on the rate you receive. Also, a 20-year mortgage term may allow the loan to be paid off quicker and with less total money out of pocket. Prequalify to see how much you might be able to borrow, start your application or explore 20-year fixed refinance rates and features. One of the reasons you might want to consider refinancing your mortgage to a shorter 20 year fixed term is to expedite the payoff of your home.

Many lenders require a minimum of 5% to 20%, whereas others like government-backed ones require at least 3.5%. The VA loan is the exception with no down payment requirements. With a 20-year fixed mortgage, you can build equity and pay off your mortgage faster than with a 30-year fixed-rate loan. The interest rate is usually lower, costing you less over the life of the loan. If your income situation is tighter and you’d prefer to have a low monthly mortgage payment, a 30-year mortgage would likely be the better option.

If you’re in your twenties to mid-thirties, you have a long road ahead of you to increase your earning potential and pay off your mortgage over the long term. When your mortgage is paid off, you’ll be relatively young to enjoy the fruits of having this large piece of debt fulfilled and owning your home outright. The standard variable rate (SVR) is the rate you’re automatically moved to at the end of your initial deal term. Your lender sets it, and it can change at any time, usually in response to the Bank of England base rate. Once you’ve taken out your 80% mortgage, you’ll repay the balance together with the interest over the mortgage term. How long your mortgage lasts depends on a few factors, like your age, but it will typically last 25 or 30 years.

Predictable monthly payments

Suppose you have 75% of that amount left as your mortgage after accounting for your down payment and mortgage payments you’ve already made. You have a balance of $271,607 to refinance, aside from any closing costs or fees that might be rolled into the new mortgage. When calculating your budget, don’t forget to factor in property taxes and homeowners insurance. Get predictable monthly mortgage loan payments with a fixed rate loan for the duration of your mortgage. Your monthly payment may fluctuate as the result of any interest rate changes, and a lender may charge a lower interest rate for an initial portion of the loan term.

The trade-off is the monthly payment on a 20-year mortgage is much higher than a 30-year mortgage. You also want to shop around for 20-year mortgage interest rates at several lenders. Fees, rates, and terms can vary, even among the best mortgage lenders.

Monthly Payment (estimated)

Between that time and July 2023, the Fed aggressively raised the federal funds rate to fight decades-high inflation. While the fed funds rate can influence mortgage rates, it doesn’t directly do so. In fact, the fed funds rate and mortgage rates can move in opposite directions. Like a conventional 30-year mortgage, a 20-year mortgage is a home loan with a fixed rate but with a shorter 20-year term. Monthly payments, consisting of the principal and interest, remain the same throughout the term of the loan.

Monthly Pay:   $2,101.53

• When considering a refinance, it’s also a good idea to explore different kinds of loans and loan terms to determine what’s best for you and your budget.
• We consider a variety of factors when we determine the interest rate and costs of your loan.
• The resulting rates represent what borrowers should expect when receiving quotes from lenders based on their qualifications, which may vary from advertised teaser rates.
• 80% mortgages work by covering all but 20% of the purchase price of the property you’re buying.
• Make purchases with your debit card, and bank from almost anywhere by phone, tablet or computer and more than 15,000 ATMs and more than 4,700 branches.

If the bond yield increases, mortgage rates tend to go up, and vice versa. The 10-year Treasury yield is usually the best standard to judge mortgage rates. That’s because many mortgages are refinanced or paid off after 10 years, even if the norm is a 30-year fixed-rate mortgage loan. For these types of loans with lower down payment options, the borrower can be required to acquire private mortgage insurance (PMI).

Bank online, with our mobile app, or visit one of our offices in Caledonia, Hudsonville, Kalamazoo, Lawrence, Paw Paw, Plainwell, Portage, Three Rivers, or Wyoming, MI. The biggest difference you will see between the two is that the 20-year mortgage will have a higher monthly payment, but you will pay less in interest over the life of the loan. Depending on your lender and the current rates, a 20-year mortgage could also have more attractive rates. Most homeowners across the United States tend to either move or refinance their home about once every 5 to 7 years.

The above calculations presume a 20% down payment on a $250,000 home & a closing cost of $3,700 which is rolled into the loan. Use our calculator to see what your mortgage payment might look like. When interest rates are low, you can potentially save money by locking in a low rate. Getting a fixed interest rate for your long-term home provides stability in your budget year after year.

Based on data compiled by Credible, three key mortgage refinance rates have risen and one remained unchanged since yesterday. Credible mortgage rates will only give you an idea of current average rates. With a fixed-rate mortgage, your interest rate will remain the same for the life of your loan.

Unlike residential mortgages, where properties can be purchased with small deposits of 10 or even 5%, buy-to-let mortgages require a higher personal contribution. By putting down a relatively large deposit of 20%, you can access lower rates compared to a mortgage with a higher LTV, like a 90% LTV mortgage. Wells Fargo has provided this link for your convenience, but does not endorse and is not responsible for the products, services, content, links, privacy policy, or security policy of this website. Jumbo loans are generally more difficult to get and come with higher interest rates. But if your dream house is $600,000, you’ll likely need a jumbo loan. Credible, a personal finance marketplace, has 4,500 Trustpilot reviews with an average star rating of 4.7 (out of a possible 5.0).

• The gap between that payment and the current one adds about $700 per month or about $252,000 over the duration of a $300,000 mortgage.
• The teaser interest rate in an ARM will be lower than a fixed rate mortgage.
• You can also use Credible’s mortgage calculator to estimate your monthly mortgage payments.
• For these averages, the customer profile includes a 740 FICO score and a single-family residence.
• You may get a lower interest rate for the initial portion of the loan term, but your monthly payment may fluctuate as the result of any interest rate changes.

To find the most current 20-year mortgage rates, you’ll want to take a look at what different lenders offer. Our mortgage comparison page allows you to compare offers from different lenders to find the best 20-year mortgage rates for you. There are two ways to look at how a 20-year home interest rate is determined. One is personal factors you can control, like your credit score. The other is external factors beyond your control, like what the Federal Reserve Board sets the federal funds rate at. Either way, many things can impact the 20-year fixed mortgage rate you’re quoted.

Please review the applicable privacy and security policies and terms and conditions for the website you are visiting. Investment products and services are offered through Wells Fargo Advisors. See how much you could qualify to borrow and what your estimated rate and payment would be. It takes just a few minutes and won’t affect your credit score. Remember that your mortgage rate is not the only number that affects your mortgage payment. For a $400,000 loan, a discount point would cost $4,000 upfront.

With fixed-rate mortgages, you also have the option to take them out in 15 or 30-year terms. A borrower may save thousands of dollars in the long run by choosing a shorter term loan. The disadvantage to the borrower, however, is that the monthly payments are higher and qualifying may be more difficult. Equity buildup from a 20 year fixed mortgage rises faster than a 30 year loan. A 10-year mortgage is the shortest fixed-rate loan available for a home purchase. As with longer-term mortgage loans, the monthly payment remains the same throughout the lifetime of the mortgage.

Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, Home Equity and Credit products are offered through U.S. While 30-year fixed terms can offer the same interest rate stability for the loan’s lifetime, homeowners can expect to pay more during the first seven years compared to a 7-year ARM. Both begin with fixed terms and convert to an adjustable-rate mortgage after the initial period.

Cons of a 7/1 ARM

Buying a home is a big step, and mortgages make it achievable, allowing you to purchase now and pay over time. Among your many options is a 7/1 ARM loan, which lets you enjoy a fixed rate for the first seven years, after which it can adjust annually. It typically starts with a lower rate than fixed mortgages, translating to early savings. Understanding 7/1 ARM rates helps you make informed decisions, ensuring your homebuying journey is both savvy and smooth.

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The rates and monthly payments shown are based on a loan amount of $270,019 and a down payment of at least 3.5%. Plus, see an FHA estimated monthly payment and APR example. Plus, see an ARM estimated monthly payment and APR example.

• Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home.
• This link takes you to an external website or app, which may have different privacy and security policies than U.S.
• Our scoring formula weighs several factors consumers should consider when choosing financial products and services.
• When the interest rate of an ARM adjusts, it will be set to a new rate, typically based on a benchmark or index, plus an additional few percentage points (called a margin).
• Please contact us in order to discuss the specifics of your mortgage needs with one of our home loan specialists.
• The rates and monthly payments shown are based on a loan amount of $270,072 and no down payment.

Fixed-rate mortgage

As mentioned above, a hybrid ARM is a mortgage that starts out with a fixed rate and converts to an adjustable-rate mortgage for the remainder of the loan term. An ARM loan is a home loan with an interest rate that adjusts throughout the life of the loan. The initial fixed-rate period is typically five, seven or 10 years. After the introductory rate term expires, the rate becomes variable for the remaining life of the loan based on an index and margin. When compared to other types of mortgages, ARMs typically have stricter requirements. That’s because lenders need to consider your ability to repay the loan if your rate moves higher.

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With an adjustable-rate mortgage (ARM) you can enjoy a lower rate and monthly payment during the initial rate period compared to fixed-rate loans. Prequalify to see how much you might be able to borrow, start your application or see current refinance rates instead. Bankrate.com is an independent, advertising-supported publisher and comparison service.

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A 5/1 ARM has a fixed rate for the first five years, whereas a 7/1 ARM locks in the rate for the initial seven years. She’s a freelance artist who goes where inspiration strikes, so committing to a 30-year fixed rate feels like a chain. A 7/1 ARM offers her the flexibility she craves, allowing her to enjoy her home without a long-term rate commitment. Option to convert to a fixed rate after the initial period. In general, each type of loan has a different repayment and risk profile.

What all those numbers in your ARM disclosures mean

Most adjustable-rate mortgages are accompanied by a rate cap, limiting how much your interest rate can increase or decrease. But homeowners who sell or refinance before the rate change can pay a significantly lower interest rate than fixed mortgages. Some even save money even though they keep the mortgage long after it starts to adjust. With the money he saves from the lower initial rates of a 7/1 ARM, he invests in booming stocks.

Year ARM Mortgage Amortization Schedule

• Recognizing these factors gives you the tools to forecast, plan and strategize, ensuring you navigate the adjustable years of your 7/1 ARM foresight and confidence.
• With a 7/1 ARM, she benefits from low initial payments, giving her breathing space until her big promotions kick in.
• The term is the amount of time you have to pay back the loan.
• Prior to Bankrate, I wrote and edited for Rocket Mortgage/Quicken Loans.
• Christopher (Croix) Boston was the Head of Loans content at MoneyGeek, with over five years of experience researching higher education, mortgage and personal loans.

I’ve covered mortgages, real estate and personal finance since 2020. At Bankrate, I’m focused on all of the factors that affect mortgage rates and home equity. I enjoy distilling data and expert advice into takeaways borrowers can use.

How is an ARM different from a fixed-rate loan?

The margin amount, the caps, the maximum lender fees and the potential for negative amortization and payment shock should all weigh more in your decision than the initial rate. Only when you’ve determined you can live with all these factors should you be comparing initial rates. Here’s a comparison of ARM loan payments against the two most popular types of fixed-rate mortgages, with all other things being equal, assuming an adjustment to the maximum payment cap. Some seven year loans have a higher initial adjustment cap, allowing the lender to raise the rate more for the first adjustment than at subsequent adjustments. It’s important to know whether the loans you are considering have a higher initial adjustment cap.

• Usually, the loan document will also outline a minimum and maximum rate, as well as a limit on how much the rate can adjust at one time.
• Check your refinance options with a trusted New York lender.
• Rates on ARMs are usually lower than rates on comparable fixed-rate mortgages, so their monthly mortgage payments are lower.
• Your payment is smaller for the initial period, but you aren’t paying back any principle.
• Information, rates and programs are subject to change without notice.
• That can mean big changes to how much interest accrues, how much you owe and how much you have to pay every month.
• An adjustable-rate mortgage makes sense if you have time-sensitive goals that include selling your home or refinancing your mortgage before the initial rate period ends.

I’m a first-time homebuyer. Should I get an ARM?

But rate caps can help protect homebuyers from too-big interest rate jumps. Knowing how 7/1 ARM rates work can help determine if it’s the right mortgage type for you. Manage your expectations by understanding its life cycle and weigh its benefits against potential risks before deciding. Because ARM rates can potentially 7 year arm increase over time, it often only makes sense to get an ARM loan if you need a short-term way to free up monthly cash flow and you understand the pros and cons. See how much you could qualify to borrow and what your estimated rate and payment would be. It takes just a few minutes and won’t affect your credit score.

Compare week-over-week changes to current adjustable-rate mortgages and annual percentage rates (APR). The APR includes both the interest rate and lender fees for a more realistic value comparison. ARMs have both a fixed-rate period at the beginning and an adjustable-rate period that follows. They are a mix of two loan types, therefore called hybrid ARMs or hybrid mortgages. A pure adjustable rate mortgage would have a rate that started adjusting your first month after closing.

Types of 7/1 ARM Loans

I’ve been writing and editing stories in the personal finance sphere for two decades, for publications like Business Week and Investopedia, covering everything from entrepreneurs to taxes. To help you find the right one for your needs, use this tool to compare lenders based on a variety of factors. Bankrate has reviewed and partners with these lenders, and the two lenders shown first have the highest combined Bankrate Score and customer ratings.

What are 7/1 ARM Rates?

The initial 7/1 ARM mortgage rates often start lower than fixed rates, potentially saving you money early on. However, because the rate can change after seven years, it’s essential to be prepared for possible fluctuations. It can be a solid choice for those eyeing short-term stays or expecting financial growth. ARM loans have an initial fixed-rate period of five, seven or 10 years and an adjustable rate for the remaining life of the loan. Your monthly payment could increase or decrease after the introductory period depending on how the index rate fluctuates. In comparison, fixed-rate loans have a fixed rate and fixed monthly payment for the entire loan term.

Knowing what type of mortgage you’re getting can be a challenge, since so many things that sound like a good idea are often the things that can cost you the most money. The FHFA also publishes a Monthly Interest Rate Survey (MIRS) which is used as an index by many lenders to reset interest rates. In order to provide you with the best possible rate estimate, we need some additional information. Please contact us in order to discuss the specifics of your mortgage needs with one of our home loan specialists.

These are ARMs that allow you to convert your balance to a fixed rate, usually for a fee. Lenders are free to offer different terms, such as 15-year rate lock periods or letting borrowers select their own payment structure and schedule. When the interest rate of an ARM adjusts, it will be set to a new rate, typically based on a benchmark or index, plus an additional few percentage points (called a margin). Your loan documents will tell you what index and margin are used. We are an independent, advertising-supported comparison service.

For this example, we assume you’ll take out a 5/1 ARM with 2/2/6 caps and a margin of 2%, and it’s tied to the Secured Overnight Financing Rate (SOFR) index, with an 5% initial rate. The monthly payment amounts are based on a $350,000 loan amount. An adjustable-rate mortgage is a home loan with an interest rate that changes during the loan term. Most ARMs feature low initial or “teaser” ARM rates that are fixed for a set period of time lasting three, five or seven years. SOFR ARMs use the Secured Overnight Financing Rate (SOFR) index to determine what the interest rate does after the initial fixed-rate period. During the adjustable-rate period, the rate becomes variable based on this index and a margin that’s set by the bank.

When should you consider a 7-year ARM?

Plus, see a conforming fixed-rate estimated monthly payment and APR example. The annual percentage rate (APR) represents the true yearly cost of your loan, including any fees or costs in addition to the actual interest you pay to the lender. The APR may be increased or decreased after the closing date for adjustable-rate mortgages (ARM) loans.

All 7-year ARMs are 30 year loans and do not come with a balloon payment. They will carry an adjustable rate for 23 years or until you pay off the loan. Yes, most 7/1 ARMs allow extra payments during the fixed-rate period, helping reduce your overall loan balance. However, always check your loan agreement for any prepayment penalties. Understanding how a 7/1 ARM works is like having a roadmap for your financial journey. Your knowledge can prevent surprises and financial pitfalls.

Usually, the loan document will also outline a minimum and maximum rate, as well as a limit on how much the rate can adjust at one time. This helps reduce the shock when interest rates reset for the first time after the initial seven-year fixed-rate period. Information, rates and programs are subject to change without notice. Both 7/1 ARMs and 7/6 ARMs offer lower interest rates at the start than prevailing rates for most fixed-rate products, such as the 30-year fixed-rate mortgage. With a 7-year ARM, the fixed rate period is for seven years; for a 5-year ARM, the fixed rate period is for five years.

You’ll be better able to make well-informed decisions, optimize your finances and potentially save money in the long run. If you found this guide helpful you may want to consider reading our comprehensive guide to adjustable-rate mortgages. Yes, if your ARM loan comes with a “conversion option.” Lenders may offer this choice with conditions and potentially an extra cost, allowing you to convert your ARM loan to a fixed-rate loan. Always read the adjustable-rate loan disclosures that come with the ARM program you’re offered to make sure you understand how much and how often your rate could adjust. It can be confusing to understand the different numbers detailed in your ARM paperwork. To make it a little easier, we’ve laid out an example that explains what each number means and how it could affect your rate, assuming you’re offered a 5/1 ARM with 2/2/5 caps at a 5% initial rate.

• If you plan to sell your home or pay off your mortgage within seven years, then a 7-year ARM may be right for you.
• Understanding 7/1 ARM rates helps you make informed decisions, ensuring your homebuying journey is both savvy and smooth.
• In addition to regular rate resets, these loans typical get recast every 5 years or whenever a maximum negative amortization limit of 110% to 125% of the initial loan amount is reached.
• Keep in mind, though, that it’s difficult to predict market or life changes.

One point equals one percent of the loan amount (for example, 2 points on a $100,000 mortgage would equal $2,000). Like an interest rate, an APR is expressed as a percentage. Unlike an interest rate, however, it includes other charges or fees (such as mortgage insurance, most closing costs, points and loan origination fees) to reflect the total cost of the loan. The variable rate on an ARM is based on a benchmark, typically the Secured Overnight Financing Rate (SOFR). This rate fluctuates based on such factors as what’s happening in the global economy and how the Federal Reserve and other central banks are responding to those trends. Recognizing these factors gives you the tools to forecast, plan and strategize, ensuring you navigate the adjustable years of your 7/1 ARM foresight and confidence.

While our priority is editorial integrity, these pages may contain references to products from our partners. If you plan to sell your home or pay off your mortgage within seven years, then a 7-year ARM may be right for you. Rates on ARMs are usually lower than rates on comparable fixed-rate mortgages, so their monthly mortgage payments are lower. The 7-year ARM offers these lower rates and the predictability of a fixed-rate mortgage for the first seven years. In some ways, ARMs can be easier to qualify for than other loans. Their lower initial rates mean smaller payments, which can keep your debt-to-income ratio lower than with a fixed-rate loan that has a higher rate.

After an initial seven-year period, the fixed rate converts to a variable rate. It stays variable for the remaining life of the loan, adjusting periodically in line with an index rate, which fluctuates with market conditions. If the index rate increases substantially, so could your mortgage payment. And if the index rate goes down, then your monthly mortgage payment could decrease. All 7-year ARMs set limits on how high or low the rate may go.

Remember that your mortgage rate might increase down the road, possibly stretching your budget in the future. The rates and monthly payments shown are based on a loan amount of $464,000 and a down payment of at least 25%. Learn more about how these rates, APRs and monthly payments are calculated.