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With potential interest rate adjustments only every three years, after which the new rate is fixed for the next three years, this loan has worked for millions of people in the past. There are two primary reasons for this decline in its activity, however.
First, like the 5 Year ARM, fewer mortgage lenders are offering this loan as an option. Second, the interest rate differential between a 3 Year ARM and a 30 Year Fixed Rate loan has not been significant enough for many borrowers to choose the former. Years ago, the 3 Year ARM was a popular loan, particularly with the savings and loan industry. However, those mortgage lenders who still hold loans and don't sell all of their mortgages into the secondary market, might still offer terms that are attractive to you.
Much depends on your future plans for your home and this mortgage. If you plan to sell your home in three to five years, the interest rate differential might make financial sense. If, however, you plan to keep your property long term and the interest rate difference between a 3 Year ARM and a 30 Year Fixed Rate loan is less than one per cent or more, you might be better served with the fixed rate mortgage loan.