3 Year Mortgage Information

This is a fairly common type of Adjustable Rate Loan wherein the initial rate is 'Fixed' for a period of 3 years and, thereafter, the rate may rise and fall in relation to a mortgage 'index'. What this essentially means is that your monthly payment will remain the same for the first 36 months and after that it may increase or decrease depending on the Index.

One of the most commonly cited benefits of this type of loan is that they historically offer the lowest rates of all loan programs. So compared to a 30 Year Fixed Rate the monthly payments are usually much more affordable. Another benefit is that if rates are declining then you won't need to refinance to benefit from the lower rates because the index (and therefore the rate) automatically reduces itself to give you the full benefit of the lower rates.

It should also be noted that 3 Year ARM's are also a fairly common program offered by 'Subprime' lenders. This type of loan also has a lower rate than a 30 yr Term but it also usually comes with a prepayment penalty (whereas most 3 Year Mortgages don't have such penalties).

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