3/1 Year Adjustable Rate Mortgage

3/1 ARM products have a fixed interest rate and payment for the initial three years of the loan. This interest rate and payment are calculated using an index and a margin. 3/1 ARM products are among the more popular because they offer a lower interest rate than the longer term 10/1, 7/1, and 5/1 loans. 3/1 ARMs can carry up to 3 year pre-payment penalties.