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Deferred Interest Mortgage Explanation

Deferred Interest Mortgage products are available from several lenders. I am so confident in this product, I have converted my home and investment property to a deferred interest mortgage. These can be complex products and I have been asked many times for a concise deferred interest mortgage explanation

An issue for many homeowners is managing monthly income and expenses, or "cash flow". Income varies for many reasons and unplanned expenses come up when least expected. For man our mortgage payment  is our largest monthly expense, and also the least flexible. The deferred interest mortgage was designed to give you control over your mortgage payment. You can choose one of four payment options monthly based on your specific cash flow 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 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 deferred interest mortgage. 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 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 a deferred interest mortgage statement as well.

The deferred interest mortgage 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 extremely low payment rates, there is a 5 year fixed payment option. With the 5 year Fixed Payment option, you have a fixed minimum payment for five years. You may increase the term of your option arm from 30 to 40 years lowering your payment further. 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 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 detailing how this program works. Send me an email requesting a copy of "Understanding the Option Arm Mortgage".

I have added a website dedicated solely to the Deferred Interest Mortgage.

Here is a useful Deferred Interest Mortgage payment calculator

Read very important information about Deferred Interest Mortgage Prepayment Penalties

Read more about Deferred Interest Mortgage Closing Costs

As a Certified Mortgage Planning Specialist, I offer an analysis of your situation today can make suggestions on how small changes in how your consumer and mortgage debt is structured today can have a life changing effect in the years to come.  Read more about this free, no obligation service.

     Deferred Interest MortgagePrequalify for your Deferred Interest Mortgage

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