3/27 Adjustable Rate Mortgage

A 3/27 ARM is a mortgage that is initially a fixed rate (for the first 3 years), and then adjusts for the next 27 years. During the 3 year fixed period, the rate will not change, and neither will your monthly payments.

The 3/27 mortgage gives you a longer period of fixed payments but comes with a slightly higher rate than a 2/28 arm would.

The 3/27 ARM, or adjustable rate mortgage is a home loan that is fixed for the first 36 months and then it becomes adjustable thereafter. After the initial fixed rate period of 3 years the rate will adjust usually every 6 months, semi-annually, or every 12 months, annually. The 3/27 will have some rate caps meaning that the rate cannot go any higher than a certain amount and any lower than a certain amount but you will need to check with your mortgage professional to find this information out beforehand.

Many home buyer with bad credit history use 3/28 ARM's, with the intention of repairing their credit profiles before the three years fixed rate period is up and refinance to a permanent mortgage with a lower interest rate.

The 3/27, like all ARMs, still is amortized over the full 30 years. Which means your payments are figured by using the full 30 year term. Many consumers have a tendency to get this confused. It is basically the same as a 30 year fixed, for the first 3 years, and then it will adjust.

A 3/27 ARM is usually .1-.25% higher then a 2/28 ARM. If you intend to refinance within 2 years you may be better off with a 2/28 ARM and the lower payment it carries.

The 3/27 ARM often has a prepayment penalty associated with it. If you think you may be in a position to pay the loan off sooner, you may want to negotiate a shorter prepay or consider a 2/28.

A 3/27 Adjustable Rate Mortgage ARM is typically safer than the more popular 2/28 Adjustable Rate Mortgage ARM because it gives you one year longer for your fixed rate period.

» DISCLAIMER: The information contained in this article on '3/27 Adjustable Rate Mortgage' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.