What is a Payment Option ARM loan program?

This loan program is an adjustable rate mortgage with a low initial monthly payment that will increase each year for the first five years. It also offers other payment options to help you budget your monthly cash flow.

• Minimum Monthly Payment
• Interest Only Payment
• 30-year Amortized Payment
• 40-year Amortized Payment
• 15-year Amortized Payment

Its low introductory start-rate allows you to make very low initial mortgage payments and low qualifying rates enable you to qualify for more home.

Calculating the monthly payment: The payment during the first five years starts by calculating the payment using the initial low introductory rate, usually 1 percent to 2 percent. That will be your payment rate. Each year the payment will increase 7.5 percent for the first five years.

In year six, the payment will then be calculated using the index rate plus the margin rate, and amortized over the remaining term of the loan. On a thirty-year loan, the remaining term is twenty-five years, and on a forty year loan the remaining term is thirty-five years.

The note rate is the interest rate the bank will charge you each month. Some programs will use the introductory rate as the note rate for the first three months. After that introductory period, the note rate will then adjust to the index rate plus the margin rate.

Deferred Interest: The minimum payment option can help keep your monthly payments affordable. If the minimum monthly payment is not sufficient to pay the monthly interest due, you will then have deferred interest. That is, the interest that was not paid will be added to the principal loan balance. Your loan balance increases each month. This is where the term negative amortized loan comes from. The balance increases, instead of decreases like in a normal loan. You can always avoid deferred interest by choosing the interest-only payment option.

Payment Options: With the option ARM, you generally have at least two fully amortized payment choices, leading to a quicker loan payoff. If you prefer to pay off your loan on schedule, you can make the fully amortized payment based on a thirty- or forty-year loan, or you can choose the fifteen-year payment option for the fastest equity buildup.

Option ARM loan programs are right for you if you'd like to own your property only for a short time, and prefer affordability and flexibility in your monthly payment. However, if you select the minimum payment option in the early years, you should be prepared for possible sudden increases in your monthly payments thereafter.

Four types of payment options:

Minimum Payment
With the minimum payment option, your monthly payment is set for twelve months at your initial interest rate. After that, the payment changes annually.

Interest-Only Payment
With the interest-only payment option, you can avoid deferred interest, when the minimum payment is not enough to pay the monthly interest due. This payment option does not result in your principal reduction. The interest-only payment will change every month based on changes in the ARM index used to determine your fully indexed rate.

Fully Amortized Fifteen-, Thirty- or Forty-year Payment
Fully amortized means you have equal monthly payments for the entire term of the loan, and have a zero balance at the end. With fully amortized payments, you pay both principal and interest. Your payment is calculated each month based on the prior month's fully indexed rate, loan balance and remaining loan term.

Index plus Margin
The index is the base rate used to determine your interest rate. Most people are familiar with the Prime rate, T-bill or Cofi. Option ARM programs are is usually based on one of the following indexes:

• Monthly Treasury Average (MTA)
• London InterBank Offered Rate (LIBOR)
• 11th District Cost Of Funds Index (COFI)
• Cost of Savings Index (COSI)

The Margin is the number of percentage points (for example, 2.75) the lender adds to the index rate to calculate the ARM interest rate, or note rate, at each adjustment. The margin is fixed at the time the loan is funded.

The interest rate you will be charged is the index rate plus the margin.

The Payment Option ARM goes by several different names: Option ARM, PayOption, Pick-a-Payment, Neg Am Variable, Negative Amortized loan.

Compare advantages of other Loan Programs

Calculate my payments with an Option ARM Loan

First Name:* Last Name:* E-Mail:* Phone:* Loan Amount: Loan Purpose: Purchase Refinance Refinance & Cash Out Loan Program: 50 Year Fixed 40 Year Fixed 30 Year Fixed 20 Year Fixed 15 Year Fixed 3/1 ARM 5/1 ARM 7/1 ARM 10/1 ARM Adjustable Interest Only Property Use: Primary Residence Second Home Rental or Investment Property Type: Single Family Condo/Townhouse 2 Units 3 Units 4 Units Other Property Value: Enter Code Shown:* * Required

---

6 Locations in Texas To Serve Your Needs - Low Rates and Fast Service -
Toll Free Phone: (888)300-3344 Toll Free Phone: (866)320-9640

OFFICES

AUSTIN, TX (512) 323-9640

7800 Shoal Creek Blvd Ste 100N

SAN ANTONIO, TX (210) 826-3344

8301 Broadway Ste 100

SAN ANTONIO N.E., TX (210) 366-1441

10202 Heritage Blvd Ste 102

BROWNSVILLE, TX (956) 371-4433

1213 E. Alton Gloor Ste H

MCALLEN, TX (956) 992-0568

801 E. Fern Ste 120 

BANDERA, TX (830) 688-6126

8860 FM 1283

 

One of San Antonios Top Mortgage Companies as recognized in the

San Antonio Business Journal

http://www.pathfindermortgagegroup.com/Top_20_Residential_20_Mortgage_20_Lender.html

As an added service to Real Estate agents and For Sale By Owners (FSBO's) we invite them to add their listings to our site. If you believe we can be of service to you, please contact your closest branch so we may add your listing to this site. Or email me at johnston@pathfindermtg.com

When looking into different Mortgage Brokers/Mortgage Companies we hope you choose our services. 

Our Path Leads To Your Future.

© 2008 Myers Internet, Inc. All Rights Reserved

Powered by: Myers Internet, Inc. | Admin Login