Pay Option ARM

Many people are payment conscious when it comes to a mortgage loan. People want the lowest interest rate to get the payment at its lowest. There are many programs out there that get you a low payment on your mortgage. The program that gets you the lowest rate and payment a lender can provide is the Pay Option ARM. The Most popular is the 5 year Pay Option ARM. What that means is the rate and principle and interest payment is fixed for 5 years at a low rate and payment, then adjusts on the 61st month. There are other names for a Pay Option ARM: Negative Amortization Loan, NEG AM Loan, Deferred Interest Loan, Flexible Payment Loan, Pick-A-Payment Loan, Cashflow ARM, Option ARM, Power ARM, and Smart Choice Loan.

There are usually 4 options on Pay Option ARM:

1. Minimum Payment
   The Minimum Payment Option provides the greatest monthly cash flow savings. This option pays a portion of the interest and nothing toward the principle. This may cause a consumer to owe more on the loan than originally started.


2. Interest Only Payment
   The Interest Only Payment Option is paying the full interest of the loan and nothing toward the principle.


3. 15 Year Fixed Rate Payment
   This option allows a consumers to apply the largest contribution towards principal and term reduction. The payment required to satisfy this is calculated by amortizing your loan based on a 15-year term from the first payment due date.


4. 30 Year Fixed Rate Payment
   This is the fully amortized payment based on a 30-year loan and is calculated each month based on the prior month's interest rate, loan balance and remaining term. The biggest advantage to this payment option is that the payment pays all of the interest due and reduces your principal.

The Pay Option ARM is not for everyone. It is usually beneficial for Short-Term Homeowners, The Self-Employed, Real Estate Investors, or Commission Only workers. This is because most people choose the minimum payment option, and could get upside down on their home if no money is being put toward the full interest over a long period of time. Do your research before applying for a Pay Option ARM.

Questions and comments are welcome.
Brought to you by:
Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"