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California Option ARM

California Option ARM products, are being available from several lenders. I have converted my home and investment property to an Option ARM. I am a mortgage broker specializing in California Option Arm products and have access to 37 lenders offering California Option Arm products to ensure you get the best loan for your specific situation.

An issue for many California homeowners is managing income and expenses. Income varies and unplanned expenses come up. For many, our mortgage payment  is our largest expense, and least flexible. The California Option ARM was designed to give you control over your mortgage payment. Choose one of four payment options monthly based on your specific needs.

        Minimum Payment    A payment is set for 12 or 60 months at a 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 and may defer payment of interest allowing greater 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 California option arm. If you have concerns over deferred interest, read about the small amount of appreciation required to offset it.

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

        Fully Amortizing Payment Options    You may make a principal and interest payment based on either a 30 year or 15 year payment schedule. I have included a California Option ARM statement as well.

The Option Arm series allows you to choose your index based on your own needs. You can chose from the 1 month LIBOR (London Interbank Offered Rate) or the MTA (12 Month Treasury Average).

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

Additional Options    If you are looking for the additional security of a fixed payment while taking advantage of the extremely low Option ARM payment rates, there is a 5 year fixed payment option. With the 5 year Fixed Payment Mortgage, you are guaranteed a fixed minimum payment for five years. You still have the four payment options to select from monthly to manage your cash flow. And,  you have the ability to increase the term of your option arm from 30 to 40 years lowering your payment further.

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 on the Option ARM again based on the 10 year average. Assumes that the Minimum Payment increases by the maximum 7.5% per year.

                    30 Fixed                    Cash Flow Minimum                 Monthly Savings                    Annual Savings

Year 1        $2,855                                $1,287                                        $1,586                                    $18,816
Year 2        $2,855                                $1,384                                        $1,471                                    $17,652
Year 3        $2,855                                $1,488                                        $1,367                                    $16,404

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

I have developed an Adobe document that goes into detail on how this new program works. Send me a quick email requesting a copy of "Understanding the California Option Arm". I will send it by return email

Here is a useful Option Arm payment calculator

Read very important information about California Option Arm Prepayment Penalties

Read more about California Option Arm Closing Costs