3/1 ARM - Example
A 3/1 ARM usually refers to an adjustable rate mortgage with an interest rate that is fixed for 3 years and that adjusts annually after that. The same pattern follows for many other ARMs advertised as N/1 ARMs where N represents the number of years that the interest rate is fixed and the 1 indicates that there will be 1 year between each adjustment.
| Related Articles |
|---|
| » Refinancing to a Fixed Mortgage |
| » Getting the Best Mortgage Possible |
In this example, we look at a 3/1 ARM for $260,000 with a starting interest rate of 6.75%. It has a 2% cap on each adjustment. It has no floor rate and a lifetime maximum interest rate of 12.75%. The index and margin are 5.2% and 1.55% respectively. When you press the Calculate button you will see that if the index rate remains stable over the life of the loan you would end up paying $347,087 in total interest.
Click on the Calculate button below to generate the amortization schedule for this example or enter your own information or explore the other examples.
The Basics: The Floor Rate Matters Margin Makes a Difference Payment Shock
Interest Rate Caps are Important Comparing Future Interest Rate Scenarios
Common Loan Types: 1/1 ARM 3/1 ARM 5/1 ARM 7/1 ARM 10/1 ARM
Other Examples: 2/28 3/27 5/25
