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The Pay Option ARM.
One of the most creative products that doesn't require a set
payment each month is the option ARM. After the first
payment, you get four payment options to choose from each
month: your lender sends you a monthly statement offering:
- Minimum payment, starting as low as 1.00%
- Interest-only payment, based on the fully indexed rate
- 30-year amortized payment, based on the fully indexed rate.
- 15-year amortized payment, based on the fully indexed rate.
Option ARM loan programs are becoming more and more popular
today, and there are
many variations of this innovative home financing product on the market:
Pay Option
ARM, Pick-A-Payment Loan, 1 Month Option ARM, CashFlow Option
Loan, LIBOR (or 12-MAT)
Pay Option Loan, etc.
Managing the Pay Option…Is it right for you?
- This loan program is an adjustable rate mortgage with added flexibility of
making one of several possible payments on your mortgage every month,
in order to better manage your monthly cash flow. It's low introductory
start rate allows you to make very low initial mortgage payments and low
qualifying rates enable you to qualify for more home.
- The minimum payment option can help keep your monthly payments
affordable. If the minimum monthly payment is not sufficient to pay the
monthly interest due, you can always avoid deferred interest by choosing
the interest-only payment option.
- With the Option ARM, you generally have at least two fully amortized
payment choices, leading to a quicker loan payoff. If you prefer to pay off
your loan on schedule, you can make the fully amortized payment based
on a 30-year loan, or you can choose the 15-year payment option for the
fastest equity build-up.
- In most cases, you can also make additional principal payments which
reduce the amount you need to pay in later months.