# 3 year Adjustable Rate Mortgage

Mortgage at variable interest rate for 3 yearsAn ARM 3/1 variable rate mortgage is a 30-year mortgage product that carries a fixed interest rate for the first three years and a variable interest rate for the remaining 27 years. The interest rate is reset each year after the initial three-year fixed period. See if a 3/1 variable rate mortgage is the right type of home loan for you.

## Three years of ARM?

An ARM 3 year is a 3 year term lending facility with a constant interest rate for the first three years that has an interest rate that changes once a year for the remainder of the term of the facility. Since the interest rate may vary after the first three years, the amount of the month's payments may also vary. One 3-year ARM, also known as 3/1 ARM, is a hybrids mortgage.

This is a combination of a variable-rate mortgage (ARM) and a fixed-rate mortgage. It starts with a set interest rate for a certain number of years (three in this case), but then changes to an ARM, with the interest rate varying once a year for the remainder of the year.

ARM is a mortgage that has an interest rate that usually changes or adapts once a year. ARMs have the advantage that they tend to give the borrowers a lower interest rate first. There is a certain amount of downside potential that the interest rate is likely to rise. Interest-rate changes are linked to an index.

One index is a released interest rate calculated on the yields of assets such as US government bonds. Interest rate levels for these assets are changing in reaction to changing markets, so an index tends to follow changes in US or global interest rate levels. The ARM is upgraded or downgraded according to the index to which it is assigned.

For a 3/1 ARM, the interest rate does not start to immediately adjust on the basis of the index. Their interest rate is set for the first three years of the 3-year ARM loans. The interest rate may vary every year after 3 years for the next 27 years or until repayment of the credit.

First number in the 3/1 ARM name indicates the number of years of the set timeframe, while second number indicates the setting range. A conversion rate is the time between possible exchange rate changes (in this case one year). Hybrids such as the 3/1 ARM tended to provide a lower starting interest rate than a fixed-rate mortgage, but a higher interest rate than a regular ARM.

Borrowers have the certainty of knowing what the monetary repayments will be for the term of the permanent loans. A 3/1 AMR will tell you exactly what the interest rate will be for the first 3 years. Then your interest rate and thus your total amount could go up or down.

An ARM 3.1 could help you saving on your mortgage payments, at least at the beginning. Let's say, for example, you buy a $200,000 home and bet 20 per cent. Once you have borrowed $160,000 at an interest rate of 7 per cent, your minimum 30 year mortgage rate would be $1,064 per month.

An ARM 3/1 can bring you into the same home, but with lower starting month payment. A 3-year ARM allows you to begin with an interest rate of 6. 25 per cent and thus make your $985.15 per month payment for the first 3 years of the loans.

After the 3-year lock-up time has elapsed, however, the interest rate may vary on the basis of the index. For this reason, it is important that you be sure that you can still make the money when interest levels go up.... The most 2/1 ARM's will have a lifelong maximum limit that will limit how much the interest rate for your mortgage can soar.

A 3/1 ARM may be right for you if you are planning to move or re-finance before the end of the first 3 years of your mortgage. When you have funded your home or divested it in the first 5 years of your mortgage, you may have to make a fine to the creditor.

Ask your creditor about the implications of any repayment of the credit during the specified time. Consider your choices when choosing the mortgage that best suits you.