5 Year Fixed Payment Option Arm
5 year fixed payment option arm products are flexible. 5 year fixed payment option arm products with a 40 year term are my choice for my home and investment property.
5 year fixed payment option arm products give you the opportunity to manage monthly income and expenses. 5 year option arm products give you control over your mortgage payment. Income varies and unplanned expenses come up. Our mortgage payment is our largest monthly expense, and the least flexible. Choose one of four payment options monthly based on your needs.
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5 Year Fixed Payment Option Arm Minimum Payment A minimum payment is set for 60 months at a reduced rate. The current minimum payment rate is 1.90%. This maximizes cash flow and may defer payment of interest allowing greater flexibility in managing tax deductions. Read about the important tax considerations of the product. For concerns over deferred interest, read about the small amount of appreciation required to offset it.
5 Year Option Arm Interest Only Payment Defer paying principal and improve your cash flow. This option is not available if the interest only payment is less than the minimum payment.
Fully Amortizing Payment Options Make a principal and interest payment based on either a 30 or 15 year payment schedule. I have included a 5 Year Option ARM statement.
You may choose your index from either the 1 month LIBOR or the MTA. I prefer the MTA index as it is a "lagging indicator" and is a better choice in a rising rate environment.
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 You also may want to increase the term of your loan from 30 to 40 years lowering your payment even further. This is the approach I use on my own loans. If I want to use the minimum payment in any given month, I want that number as low as possible. LTVs are now available up to 100%!
The Minimum Payment Advantage The example below is based on a $400,000 mortgage. It compares a traditional 30 year fixed rate payment based on the above 10 year average to the minimum payment available based on the 10 year average. Assumes that the Minimum Payment increases by the maximum 7.5% per year after the 60 month fixed period.
30 Fixed Cash Flow Minimum Monthly Savings Annual Savings
Year 1-5 $2,855
Savings over 3 years $52,872
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Here is a useful 5 Year Fixed Payment Option Arm payment calculator
Read very important information about 5 Year Fixed Payment Option Arm Prepayment Penalties
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