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A mortgage with a rate that is fixed at first, then adjusts periodically.
An ARM offers a lower fixed rate for an initial period — often 5, 7, or 10 years — after which the rate adjusts up or down with the market on a set schedule. It can save money if you expect to sell or refinance before the adjustment period, but it carries the risk of higher payments later.
A 7/1 ARM keeps a fixed rate for seven years, then adjusts once a year after that.
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