7/1 interest-only ARM
7/1 interest-only ARM
A 7/1 interest-only ARM (adjustable-rate mortgage) has several distinct features. First, the minimum payments during the first seven years of the mortgage do not reduce the principal balance. The interest rate remains the same during this period. Thereafter, the mortgage converts to an amortizing loan and the interest rate resets to track with a stated financial index. The rate is then adjusted once annually, based on the movements of the underlying index and subject to preset limits.
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