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Interest Only ARMSInterest only ARMs are an excellent choice. Interest only arms are designed to offer the lowest payment as you are not paying principal. Interest only arms allow you to buy more home than a fully amortizing mortgage. Interest only arms are flexible. Make additional payments toward your principal balance at any time with interest only arms. If you do, your next interest only payment will be lower as it is calculated based on the current balance. With a fully amortizing loan, any additional payments do not change the payment. Interest only arms were originally designed for individuals whose income is cyclical. For example, an individual who is a sales executive with a relatively low base salary but commission or bonus payouts quarterly would benefit from interest only arms. You would have the lowest possible payment during months when no bonus is paid and you would be able to make contributions to the principal balance when the quarterly bonus is paid. However, I am seeing individuals in many situations choosing interest only arms as a method of lowering their payment, sometimes significantly. Of all of the interest only arms available, the Cash Flow Interest Only ARMs offers the greatest flexibility by far. Interest only arms are available for a 30 or 40 year term, with the first 5 or 10 years interest only (depending on the lender selected) and the final 20 to 25 years fully amortizing although I am now seeing some progressive lenders offering this option on Interest Only ARMs. Some lenders who offer interest only arms require a prepayment penalty for the first 1-3 years and have caps on the amount your rate can change at any time and over the life of the loan. I often can avoid prepayment penalties on these and other types of loans and can usually work around the requirement. Reduced documentation Interest only mortgage arms are readily available as well. Again, interest only arms are not the right choice for everyone, but can be a very effective choice for some individuals. Please give me a call or send an email and I will be happy to discuss this alternative with you. An example of how powerful this tool can be: If you want to make the comparison for your own specific
situation, calculators to find the
amortizing payment are available on this website. The math to find the simple
interest payment is, Loan Amount x Interest Rate / 12. I have just developed a short PowerPoint presentation in .pdf format on interest only arms, some real world examples, and some suggestions on how best to use them available by email Read more about Interest Only Arms Closing Costs I have an article "Buying your home in 2008" by email explaining negotiating strategy in today's market. As a Certified Mortgage Planning Specialist, I offer an analysis of your situation today can make suggestions on how small changes in how your debt is structured today can have a life changing effect in the years to come. Read more about this free, no obligation service. New! View my Wealthbuilder presentation and learn the safe way to manage your debt and fund your retirement. I hope the information on this page was useful to you. Please scroll down to view my Mortgage Market Guide. It is a weekly publication explaining the financial markets from a consumer's perspective that is available on this website or by email subscription. I have nearly 8,000 subscribers today and would be happy to have you as well. Your email address will never be used for any other purpose.
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