When is a 7/6 ARM loan advantageous?

7/6 ARM is an adjustable rate mortgage (ARM) loan that has a fixed rate for seven years, and then a mortgage interest rate that adjusts every six months after the seven year period. CapCenter's adjustable mortgage interest rate depends on the SOFR index.

These mortgage loans are advantageous if you plan to move out of your home within seven years or if you believe interest rates, based on the SOFR index, will drop after seven years. 7/6 ARMs often have lower interest rates than other fixed loan options for the seven year fixed period since the interest rate risk is shared with the lender.

The 7/6 ARM is a great alternative to the temp buy down offer for borrowers with a slightly longer time horizon.