Frequently Asked Questions

• What will my margin be when the fixed rate is over?
• What Index will my interest rate be tied to?
• Can I convert to a fixed rate?
• Are these Balloon Mortgages?
• Do Interest Only Loans have Prepayment Penalties? - If so, How do they work?
• How Does Interest Only Loans compare to my local bank?
• What happens when the initial fixed term of my loan is over?
• What is the benefit of doing an interest Only Loan versus a Principle and Interest Loan?
• What happens if I decide to do a 5/1 ARM and then two years into my loan I want more security?
• What happens if my monthly interest only payment is $1,000.00 per month and I want to pay more?
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Pay Option ARMS

• What is a Negative Amortization Loan?
• Why consider a MTA Cash Flow Arm?
• How will a Pay Option ARM mortgage loan benefit me?

 

How will a Pay Option ARM mortgage loan benefit me?

This Pay Option ARM offers our clients the opportunity and flexibility to strategically manage their cash flow by offering four monthly payment options. As you know, traditional mortgages such as a 15, or 30 year fixed rate mortgage, offer a single payment choice that consists of principal plus interest. After your lender deducts the interest portion due, the principal is then invested by the lender, with no benefit to you.

With the Pay Option ARM you have the option to select the payment method that best suits your financial situation every month. Thus, it gives you control over your loan payment hence the name pick a payment loan.

The Pay Option ARM gives you the flexibility to decide whether you would like to match your loan payments to your variable or seasonal income, or whether you would like to put more money into a business, investments, or large expenses like college tuition. In essence, it gives you control over how you pay your mortgage so you can do what makes sense - for you. View a sample monthly statement by clicking here.

Option ARM One - A 15 year fully amortizing payment, which allows you to accumulate equity in your home at a faster rate. This would obviously create a quicker payoff and save a substantial amount of interest over time.

Option ARM Two - A 30 year fully amortizing payment, which allows you to pay your loan off in a 30 year timeframe as most families are accustomed to, yet take advantage of fluctuations in the market with the Adjustable Rate nature of the program.

Option ARM Three - An interest only payment which allows you to take full advantage of the potential tax savings from a 30 year mortgage while investing or utilizing the principal portion for retirement planning, college planning, debt consolidation or any number of other needs that may arise.

Option ARM Four - The minimum monthly payment option, has a low start rate (currently 2.95% to 4.95% depending on the investor your choose, credit, income and other market factors). This option not only maximizes cash flow giving you more cash each month for other expenses, but also defers payment of interest on your loan. This may allow you greater flexibility in managing your tax deductions

The four payment options let you decide every month how to tailor your mortgage payments to achieve your short and long-term cash flow needs.

How does it work?

Every month, your lender will send you a monthly payment coupon offering your the four options discussed above.

In addition to the information on the coupon, your monthly statement will also contain account activity that occurred since the last statement: i.e., beginning and ending balance amounts; previous payments; interest paid; current ARM interest rate; escrows/other, etc.

How Is The Interest Rate Determined?

The Power Option Loan uses a monthly Adjustable Rate concept to determine the actual rate of interest charged. In the above example we used the Cost of Funds Index (COFI). Other commonly used indices include the Monthly Treasury Average (MTA) and London Interbank Offered Rate (LIBOR). Your loan expert will determine the index and program that best fits your individual financial situation. A fixed amount of percentage points (the "Margin") is added to the index which when combined with the indexed rate, established your effective interest rate and as such your monthly payment

Who Should Choose the Pay Option ARM and Why?

Anyone who wants to take control of their monthly cash flow and financial future. As noted, "Pay Option ARM " gives you the flexibility to decide whether you would like to match your loan payments to your variable or seasonal income or whether you would like to put more money into investments or toward large expenses. The choice is yours! Talk to one of our loan experts about your financial goals and learn how the Pay Option ARM can help you reach them.

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