Community Trust Mortgage - Understanding a 3/1 ARM

What Is a 3/1 ARM?

A 3/1 Adjustable-Rate Mortgage (ARM) gives homebuyers flexibility and potential savings. This loan starts with a fixed interest rate for the first three years. After that, the rate adjusts annually based on market trends. Many buyers choose this option to reduce initial mortgage payments and manage finances more easily in the early years.

How Does a 3/1 ARM Work?

For the first three years, you lock in a fixed interest rate. Your monthly payments stay the same, making budgeting more predictable. Once the fixed period ends, the rate becomes adjustable. Each year, it shifts based on financial indicators like the U.S. Treasury or LIBOR rates.

The rate may increase or decrease with each adjustment. To prevent extreme hikes, most 3/1 ARMs have built-in caps. These limits help control how much the rate can rise annually and over the entire loan term.

Why Choose a 3/1 ARM?

Many homebuyers opt for a 3/1 ARM because they plan to move or refinance before the adjustable phase starts. Here are the main advantages:

• Lower Initial Payments: The starting interest rate is typically lower than a fixed-rate mortgage.
• Potential Savings: You may save thousands in interest during the first three years.
• Flexibility: Ideal for those expecting a salary increase or planning to relocate soon.

While a 3/1 ARM has benefits, it’s important to consider the risks. If interest rates rise, your monthly payments could increase after the fixed period. That’s why working with a trusted lender like Community Trust Mortgage helps you understand all possibilities before making a decision.

Is a 3/1 ARM Right for You?

The best mortgage choice depends on your financial goals. If you expect to sell or refinance in a few years, a 3/1 ARM could be a smart move. On the other hand, if you want long-term payment stability, a fixed-rate mortgage might be the better option.

At Community Trust Mortgage, we take the time to explain all your choices. Our experienced team breaks down the details so you can confidently select the loan that fits your needs.

Contact Us Today

You don’t have to figure out mortgages alone. Reach out to Community Trust Mortgage for expert guidance on 3/1 ARMs. Our knowledgeable team walks you through every step, helping you secure the right loan with confidence.

Let us make homeownership more affordable and stress-free for you!