7/1 ARM vs 30-Year Fixed Mortgage
A **7/1 ARM** fixes the rate for seven years then adjusts annually—lower start rate if you sell or refi before adjustment. A **30-year fixed** locks the payment for the full term—better when rates are low or you keep the home decades.
Step by step
1. Model year 8 payment
Use ARM caps (often 2/2/5) for worst-case adjustment.
2. Compare 7-year interest
ARM wins if you move before the reset window.
3. Stress higher rates
If still owning in year 8, fixed may have been cheaper.
7/1 ARM vs 30-year fixed
Average U.S. tenure is ~8 years—ARMs align for some movers.
- 7/1 ARM: Lower initial rate; adjustment risk after year 7.
- 30-year fixed: Payment certainty; higher starting rate.
Use our calculators
Common mistakes
- Assuming you will refi on time
- Ignoring PMI on both options
FAQ
Can ARM rates drop?
Yes if the index falls—check floor on your note.