OPTION ARM LOAN
Option ARMS offer you the most flexibility when qualifying for a loan, then put you in control of your finances when you start making payments. With your Option Arm Loan you can manage your money the way you want with up to 4 payment options each month:
1. Minimum Payment: The smallest payment to let you keep the most cash now.
Choose this option to let you keep more cash now and keep monthly payments manageable. Generally, this payment changes annually and is calculated using the initial interest rate for the first 12 months. After that the minimum payment is usually recalculated based upon the outstanding principal balance, remaining loan term and prevailing interest rate.
2. Interest Only Payment: No principal reduction and No negative amortization.
At those times when the Minimum Payment is not enough to pay the monthly interest due, you can avoid deferred interest with this option. With your Option Arm Loan you pay the minimum monthly payment together with all additional interest accrued during the month. So you avoid deferred interest and your payments are still manageable.
3. Fully 30 or 40 year Amortized Payment: Reduce your principal balance and pay off your loan on schedule.
It's calculated each month based on the prior month's interest rate, loan balance and remaining loan term. When you choose this option with your Option Arm Loan you reduce your principal balance and pay off your loan on schedule.
4. 15 year Payment: Own your home twice as fast.
If you want to build equity faster, pay off your loan quicker and save on interest. This is the option for you! It's calculated to amortize your loan based on a 15 year term from the first payment due date and you can pay off your Option Arm Loan is a shorter period of time.
Each month it is your choice on which payment option to make with your Option Arm Loan. You can use the minimum payment one month, add interest to your principal balance and the next month pay extra and reduce your principal!!
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