Option ARMs Information
Option ARMs are available from several lenders. I have converted both my home and investment property to Option ARMs.
An issue for many homeowners is in managing monthly income and expenses. Income varies and unplanned expenses come up. For many, our mortgage payment is our largest monthly expense, and the least flexible. The Option ARM was designed to give you control over your mortgage payment. Choose one of four option arms payment options each month based on your cash flow needs.
Minimum Payment A payment that 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 also 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 about the important tax considerations of option arms. 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 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 may make a principal and interest payment based on either a 30 year or 15 year payment schedule. I have included a Option ARM statement as well.
The Option Arm series 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 additional security of a fixed payment while taking advantage of the low Option ARMs payment rates, there is a 5 year fixed payment option. With the 5 year Fixed Payment, you have a fixed minimum payment for five years. You have the four payment options to select from to manage your cash flow. And, 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 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
Savings over 3 years $52,872
Please feel free to email me with any questions about the Option Arms
Learn more about Option Arms Closing Costs
I have developed an Adobe document detailing on how this program works. Send me an email requesting a copy of "Understanding Option Arms".
I have added a website dedicated solely to Option Arms.
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.
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