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ARM Mortgages: Modification & Refinance Options

This site has options for modifying an adjustable mortgage, or obtaining a new home loan. A '3 1 ARM', or '3/1 ARM', has been a popular mortgage product. Borrowers should be careful to be sure that the adjustable rate that will kick in after three years will result in monthly loan payments that the homeowners can afford. For some buyers, rather than a 3 year ARM, a 5/1 ARM loan, or a 7/1 ARM mortgage, or even a classic fixed rate mortgage may be the better choice.

A 3/1 ARM, also called a 3 and 1 Adjustable Rate Mortgage loan, is a mortgage that is at a fixed interest rate for the first three years. Then, in the 4th year, it becomes an adjustable mortgage, and adjusts once each year ( thus the '1' in the name.) Loans like this, and the 5/1 ARM are also known as 'Hybrid ARMs', because they are are fixed for a certain term, and then are adjustable loans for the remainder of the term. After the initial fixed rate period, when the 'reset date' is reached, the loan becomes adjustable, and a new interest rate is determined based on several factors. That interest rate will now change periodically, usually every year. There may be periodic caps and lifetime caps for the interest rate written into the contract.
An adjustable home mortgage may start with an initial period during which the loan has a fixed interest rate. It can be referred to as a hybrid mortgage loan because it is neither entirely fixed nor entirely adjustable.