40 Year Option ARM

40 Year Option Arm products are flexible. 40 year Option Arm products are used on my home and investment property.

40 year Option Arm products help manage monthly income and expenses, or "cash flow". Income varies and unplanned expenses come up. Our mortgage payment is our largest monthly expense, and the least flexible. 40 year option arm products allow you to choose one of four payment options based on your cash flow needs.

Minimum Payment A payment is set for 12 or 60 months ata reduced rate. The minimum payment rate for the 12 month option is 1.00%, and the 60 month option is 1.90%. This maximizes cash flow but may also defer payment of interest on your mortgage allowing flexibility in managing your tax deductions. This minimum payment can not increase by more than 7.5% each year. Read more about the important tax considerations of a 40 year option arm. If you have concerns over deferred interest, read more about the small amount of appreciation required to offset it.

Interest Only Payment Defer paying principal on your loan and improve your monthly cash flow. This option is not available if the interest only payment is less than the minimum payment.

Fully Amortizing Payment Options You have the ability to make a full payment based on either a 30 year or 15 year payment schedule. I have included an Option ARM statement as well.

The 40 year Option Arm allows you to choose your index from the 1 month LIBOR or the MTA.

Here is a 10 year average comparison between a 30 year fixed and fully indexed LIBOR, MTA, COFI, and the 1 year Treasury Index in chart form.

Additional Options If you want the security of a fixed payment while taking advantage of the low payment rates, there is a 5 year fixed payment option. With the 5 year Fixed Payment option, you are guaranteed a fixed minimum payment for five years. You have the ability to increase the term of your option arm from 30 to 40 years lowering your payment further. 40 Year Option Arm LTVs are available up to 100% !

The Minimum Payment Advantage The example is based on a $400,000 mortgage. It compares a 30 year fixed rate payment based on the 10 year average to the minimum payment available on the 40 year Option ARM again based on the 10 year average. Assumes that the Minimum Payment increases by the maximum 7.5% per year.

30 Fixed 40 year Option Arm Minimum Monthly Savings Annual Savings

Year 1        $2,855                                    $1,011                                        $1,844                                    $22,128
Year 2        $2,855                                    $1,087                                        $1,768                                    $21,216
Year 3        $2,855                                    $1,168                                        $1,687                                    $20,244

Savings over 3 years $52,872
Savings invested at 8% $56,885

I have developed an Adobe document detailing how this program works. Send me an email requesting a copy of "Understanding the 40 Year Option Arm".

I have added a website dedicated solely to the 40 Year Option Arm.

Here is a useful 40 Year Option Arm payment calculator

Read very important information about Prepayment Penalties