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Pay Option Loan

Pay Option Loan products are available flexible. I have converted my home and investment property to the Pay Option Loan. 

An issue for many is managing 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 loan was designed to give you control over your payment. Choose one of four payment coptions monthly based on your cash flow needs.

        Minimum Payment    A payment is set for 12 or 60 months at a greatly 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 a pay option loan. 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 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 Loan 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 rate, there is also a 5 year fixed payment option. With the 5 year Fixed Payment, you have a fixed minimum payment for five years. You still have the four payment options to select from monthly to manage your 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

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

Please email me with any questions about the Pay Option Loan

Learn more about Pay Option Loan Closing Costs

Here is a useful Pay Option Loan payment calculator

Read very important information about Pay Option Loan 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.

    Pay Option LoanPrequalify for your Pay Option Loan

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