They're both the same thing. Three years of guaranteed fixed rate, and then adjusting every 1 year thereafter, for the next 27 years.

Since I've bought my current place in August '99, I've refi'ed twice. Original mortgage was 7.875%, 30-yr fixed. Second mortgage was 6.5%, 7-year balloon (7 years at a fixed rate, balance due at end -- no adjusting, just Pay The Man.) Current is 5.25%, 30-yr fixed.

Like you, AScott, I've never seriously considered an ARM. The short-term savings that an ARM provides (especially when ARM rates were around 4%) are greatly outweighed by the potential that rates rise. And if an ARM is at 4%, how much lower can it go? How much higher can it go (even if it's capped at 6% max, that's still 10% interest...)

I remember my realtor telling me -- when I was looking at this place in '99 -- that they bought their first house in the early 80's at 18% interest. On her mortgage, not her credit card. That absolutely blows my mind, but still...Do you want it to happen to you?

If you can afford it, I'd take the known-costs of the fixed rate. You can always refi again if rates drop significantly.