Current 3/1 ARM rates

When is it a good idea to get a 3/1 ARM?

Although they can be risky, there are some scenarios when it might be a good idea to get a 3/1 ARM:

• You plan to sell the home before the first rate adjustment.
• You plan to use the savings from the first three years for a higher-yield investment or other financial goal.

Let’s break down the pros and cons of ARM loans further:

Pros of a 3/1 ARM

• Lower payments to start: The lower introductory rate on a 3/1 ARM as compared to fixed-rate — and even other ARM — loans makes the monthly payment more affordable, at least initially, which frees up room in your budget.
• More opportunities for your money: You could take those monthly savings and invest, or put the funds toward another financial goal.
• Significant savings if you plan to move: If you’re certain you’ll offload the mortgage before the fixed-rate period ends, you could save a bundle on interest.

Cons of a 3/1 ARM

• Risk of higher rate: No one can predict how interest rates will move. Even with caps in place, your rate and payment could rise considerably over the life of the ARM.
• More challenging to budget for: With a fixed-rate mortgage, you’ll have one set payment. With a 3/1 ARM, you’ll only have a set payment for three years. This can make future budgeting or financial planning much more difficult.

How to compare 3/1 ARM rates

When comparing 3/1 ARM loan offers, here are three key considerations:

1. Interest rate and annual percentage rate (APR): The APR includes the interest rate and fees, both of which vary widely among lenders. Using this figure helps you understand the full cost of your loan. Bankrate can help you shop for mortgage rates and receive tailored offers.
2. ARM terms: Compare 3/1 ARM rates and estimated payments to those on a 5/1 ARM and other ARM terms. The introductory rates are higher on longer-term ARMs, but the trade-off is that the fixed-rate period lasts longer.
3. Caps and other fine print: When comparing ARM loan offers, make sure you fully understand the rate caps and any other details about the structure and repayment of the loan.

3/1 ARM loan FAQ

Additional 3/1 ARM loan resources

• ARM loan calculator
• Fixed vs. adjustable-rate mortgages
• Guide to FHA ARMs
• Refinancing an ARM to a fixed-rate mortgage

Meet our Bankrate experts

Written by: Andrew Dehan, Writer, Home Lending

I’ve covered mortgages, real estate and personal finance since 2020. At Bankrate, I’m focused on all of the factors that affect mortgage rates and home equity. I enjoy distilling data and expert advice into takeaways borrowers can use. Prior to Bankrate, I wrote and edited for Rocket Mortgage/Quicken Loans. My work has been published by Business Insider, Forbes Advisor, SmartAsset, Crain’s Business and more.

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Edited by: Suzanne De Vita, Senior Editor, Home Lending

I’ve covered the housing market, mortgages and real estate for the past 12 years. At Bankrate, my areas of focus include first-time homebuyers and mortgage rate trends, and I’m especially interested in the housing needs of baby boomers. In the past, I’ve reported on market indicators like home sales and supply, as well as the real estate brokerage business. My work has been recognized by the National Association of Real Estate Editors.

Read more from Suzanne De Vita