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Pay Option ARM Presentation

Pay 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
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 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 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.