The low rate allows them to buy a costlier home yet pay the lowest mortgage payment possible. The down side is that there are costs associated with refinancing. So before you use this option, look at all the costs and do the math yourself or ask for help from your loan officer. You can enjoy the interest and payment benefits with less of the risk. Ask your lender to help you crunch the numbers.
Some contracts stipulate a penalty for paying off the loan early.
Most adjustable rate mortgages also have a periodic rate cap, which limits the amount of rate increase for each adjustment. This loan is considered quite risky because your payment may change significantly from year to year. This loan, while risky, is safer than the 1-Year Adjustable Rate Mortgage only because it does not adjust as frequently. This loan is a nice compromise between shorter term Adjustable Rate Mortgages and Fixed Rate programs. This 30-year loan offers a fixed interest rate for the first 3 years and then turns into a 1 Year Adjustable Rate Mortgage for the remaining 27 years of the loan.