Frequently
Asked Questions
Pay Option ARMS
What
is your margin when the fixed rate is
over?
This really depends on
the lender and the product offered.
Variable rate mortgages are based on a
number of factors to asses the lenders
particular risk profile for the program.
What does this mean to you? It means
once your initial fixed rate period is
over you will be subject to the measured
index of your mortgage product plus a
pre-defined margin. For example,
If you were to be coming out of a six
month libor loan today your rate would
be much lower than traditional fixed rate
loans. The LIBOR index is currently
around 1.30 so if you had a margin of
(1.25%) you would have a current fully
indexed rate of 2.55% for your mortgage!
Of course, this rate will change monthly
or annually so consult
with a LIBOR mortgage professional
to learn what libor programs are currently
available.
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What
Index will my Interest Rate be adjusted
to?
Most "Interest Only"
loans are tied to the LIBOR index - LIBOR
is an abbreviation for "London Interbank
Offered Rate," and is the interest rate
offered by a specific group of London
banks for U.S. dollar deposits of a stated
maturity - however some are also tied
to the one year CMT. To learn more
about the program specifics please consult
a local mortgage professional by clicking
here .
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Can I
convert to a fixed rate?
Most "Interest Only"
loans do not have fixed rate conversion
options but product features and guidelines
change daily. To learn more about
the current program specifics please consult
a local mortgage professional by clicking
here .
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Are these
Balloon Mortgages
No. Most "Interest
Only" loans are not balloon type mortgages.
Those that have a longer initial fixed
period such as the 3,5,7 and 10 year
programs will not have the note due and
payable at the end of the fixed term.
The mortgage will simply turn into a fully
amortized loan thus your balance (after
5 years on a 5 year fixed interest only
loan) will be amortized over the remaining
25 years as a normal 25 year "principal
and interest" mortgage would except at
an adjustable rate. To learn more
please consult a local mortgage professional
by clicking here
.
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Do Interest
Only Loans have Prepayment Penalties -
If so, How do they work?
Most "Interest Only"
loans do not have prepayment penalties
however there are certain advantages to
taken a prepayment penalty. The
option will depend on your application
profile and the lender you choose but
you may be able to save up to 0.25% on
the rate just by taking a prepayment penalty
for the first 3 years. To learn
more please consult a local mortgage professional
by clicking here
.
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a Quote
How
Does Interest Only Loans compare
to my local bank?
IOBL is like having over
107 "Local Banks" to choose
from without having to do the leg work
yourself. Often times banks differ as
to the types and sizes of loans they would
like to lend on. IOBL does all the leg
work for you by matching you up with the
ideal lenders for your individual situation.
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What
happens when the initial fixed term of
my loan is over?
Typically when the initial
fixed term is completed, your new rate
is determined by taking the index plus
your margin. For example if your margin
is 2.75% and your index is 1.75%, your
new fully indexed rate would be 4.00%.
This can then change monthly, bi-yearly
or yearly depending upon the loan you
have choosen.
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What
is the benefit of doing an interest Only
Loan versus a Principle and Interest Loan?
The beauty of doing an
interest only loan is that it puts the
borrower in control of how much principle
is paid down while allowing for a reduced
monthly payment. When doing a principle
and interest loan, the bank determines
how much principle is applied each month
to your loan balance leaving the borrower
with less options.
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What
happens if I decide to do a 5/1 ARM and
then two years into my loan I want more
security?
Just because you do a
3/1, 5/1 or 7/1 ARM does not mean you
can not re-finance before your fixed term
is complete. Most Adjustable Rate Mortgages
do not have pre-payment penalties and
allow for borrowers to refinance at their
discretion.
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What
happens if my monthly interest only payment
is $1,000.00 per month and I want to pay
more?
Any amount paid above
and beyond the minimum payment of $1,000.00
will go directly towards paying down your
principle. For example, if you were to
pay $2,000.00 ($1,000.00 above the minimum)
for a single month then your loan balance
would decrease by $1,000.00 the following
month.
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What
is a Negative Amortization Loan?
This is a deferred-interest
loan which is very powerful -- and the
most misunderstood mortgage program because
of its many options. Basically, the lender
allows the borrower to make monthly payments
that are less than the accruing interest.
Therefore, if the borrower chooses to
make the minimum monthly payment, the
loan balance will increase by the amount
of interest not paid on the loan. The
power of this loan lies in the borrower's
ability to choose between making the full
loan payment, or the minimum payment,
or any amount in between. If a borrower's
income varies throughout the year (due
to commissions, bonuses, etc.), the borrower
can make a lower payment during the "lean
times", and then make higher payments
when funds are readily available.
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Why
consider a MTA Cash Flow Arm?
There are many reasons
a home buyer may consider an MTA home
loan. Each reason being unique to the
home buyer. An MTA Cash Flow Arm is for:
interest only loans 
florida home mortgages 
low interest rates quotes 
new york lending institutions 
savings calculator agent
