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Pay Option ARM PresentationPay Option ARM products are available from several lenders. I have converted my home and investment property to the Pay Option ARM. 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 pay option arm was designed to give you control over your mortgage payment. Choose one of four payment options each month 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 variation is 1.00%, and the 60 month option is 1.90%. This option 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 a pay option arm. If you have concerns over deferred interest, read about the small amount of appreciation required to offset it. Interest Only Defer paying principal and improve cash flow. This choice is not available if the interest only payment is less than the minimum payment. Fully Amortizing Payment Choices You 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 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 Choices If you want the additional security of a fixed payment while taking advantage of the low payment rates, there is a 5 year fixed payment version. With the 5 year Fixed Payment, you have a fixed minimum payment for five years. You still have the four payment choices to select from to manage your cash flow. You have the ability to 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 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
Savings over 3 years $52,872 I have developed an Adobe document detailing how this program works. Send me an email requesting a copy of "Understanding the Pay Option Arm". I have added a website dedicated solely to the Pay Option Arm.
Here is a useful
Pay Option Arm
payment calculator
Read very important information about
Pay Option ARM Prepayment Penalties As a Certified Mortgage
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