# Monday, January 22, 2018

This loan program is an adjustable rate mortgage with a low initial monthly payment that will increase each year for the first five years. It also offers other payment options to help you budget your monthly cash flow. - Minimum Monthly Payment
- Interest Only Payment
- 30-year Amortized Payment
- 40-year Amortized Payment
- 15-year Amortized Payment
Its low introductory start-rate allows you to make very low initial mortgage payments and low qualifying rates enable you to qualify for more home. Calculating the monthly payment: The payment during the first five years starts by calculating the payment using the initial low introductory rate, usually 1 percent to 2 percent. That will be your payment rate. Each year the payment will increase 7.5 percent for the first five years.
In year six, the payment will then be calculated using the index rate plus the margin rate, and amortized over the remaining term of the loan. On a thirty-year loan, the remaining term is twenty-five years, and on a forty year loan the remaining term is thirty-five years. The note rate is the interest rate the bank will charge you each month. Some programs will use the introductory rate as the note rate for the first three months. After that introductory period, the note rate will then adjust to the index rate plus the margin rate.
Option ARM loan programs are right for you if you'd like to own your property only for a short time, and prefer affordability and flexibility in your monthly payment. However, if you select the minimum payment option in the early years, you should be prepared for possible sudden increases in your monthly payments thereafter.
- Monthly Treasury Average (MTA)
- London InterBank Offered Rate (LIBOR)
- 11th District Cost Of Funds Index (COFI)
- Cost of Savings Index (COSI)
The Margin is the number of percentage points (for example, 2.75) the lender adds to the index rate to calculate the ARM interest rate, or note rate, at each adjustment. The margin is fixed at the time the loan is funded. The interest rate you will be charged is the index rate plus the margin. The Payment Option ARM goes by several different names: Option ARM, PayOption, Pick-a-Payment, Neg Am Variable, Negative Amortized loan. |

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