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Pay Option

Pay Option products are available from several lenders lenders. I am so confident in this product, I have converted my home and investment property to them. 

An issue for many homeowners is 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 product was designed to give you control over your mortgage payment. Choose one of four payment pay options monthly based on your 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 version is 1.00%  and the 60 month 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 this product. If you have concerns over deferred interest, read about the small amount of appreciation required to offset it.

        Interest Only Payment    Defer paying principal on your loan and improve monthly cash flow. This variation is not available if the interest only payment is less than the minimum.

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

The product 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 still taking advantage of the low payment rates, there is a 5 year fixed version. With the 5 year Fixed Payment Mortgage, you have a fixed minimum payment for five years. You still have the four payment choices to select from monthly to manage  cash flow. You also have the ability to increase the term of your loan from 30 to 40 years lowering your payment even 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 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

Please feel free to email me with any questions about the Pay Option

Learn more about Pay Option Closing Costs

I have developed an Adobe document detailing how this program works. Send me an email requesting a copy of "Understanding the Option Arm".

I have added a website dedicated solely to the Pay Option.

Here is a useful Pay Option payment calculator

Read very important information about Pay Option Prepayment Penalties

Learn more about origination fee and discount points and their use to buy down your mortgage interest rate.

Read on to learn more about other closing costs in addition to the origination fee

    Pay Option Prequalify for your Pay Option

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