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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.
3/27 adjustable rate mortgages are a
wise choice for consumers who know that they will not be
living in their homes any longer than 3 years or they
know without a doubt that they will be refinancing
within the first 3 years of their mortgages. A 3/27 is
sometimes referred to as a band-aid loan because some
mortgage professionals like to place consumers into 3/27
adjustable rate loans for a temporary time period in
order for the consumer's situation, finances or credit
to improve. Therefore, 3/27 adjustable rate mortgages
are sometimes a very good loan option. 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.
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Information listed above is to be used for educational purposes only and is not guaranteed
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