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Pay Option ARM's (Adjustable Rate Mortgages)
- Many times these loans offer interest (1% or higher) starting rates.
These are designed to offer four monthly payment options. These include:
- Interest Only
- Fully Amortization 30 Year Payment Schedule
- Fully Amortization 15 Year Payment Schedule
- Minimum Payment
- For a customer that is looking for a program that offers "interest only", I would recommend going into an interest only program as apposed to a Pay Option Arm.
Yes, starting rates are low, however, generally the margins are set higher than the margins in "interest only" loans.
- Pay option rates are determined by adding the libor and margin (margin is fixed) to determine the rate.
- This is a comparison of monthly payments between a Fixed Rate, 3/1 Arm, and Interest Only mortgage.
|
Loan Amount |
Fixed Rate |
3/1 Arm |
Interest Only |
|
$150.000 |
5.625 %
(APR 5.75 %) |
4.75 %
(APR 5.232 %) |
3.75 %
(APR 5.828 %) |
|
Principle & Interest Monthly Payment |
$863.96 |
$782.47 |
$468.75 |
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