The newest twist to the option payment mortgage are loan products that offer fixed rates of interest in addition to the low payment options that are also fixed for various periods. This eliminates some of the risk of the more traditional option payment ARM loan, especially in rising interest rate environments.Financially savvy home buyers often prefer Fixed Rate Option Payment mortgage over conventional financing. They use it to maximize leverage, increase purchasing power, and lower monthly mortgage payments.
A fixed rate option loan can be a tool to manage your finances. There are times when a person's cash flow may have it's highs and lows. A fixed rate option loan will allow you to determine how to plan for those times.
With a Fixed Rate Option Payment Mortgage, you would have an option to choose 1 of 3 different payment amounts during the initial period. One, you could make a fully amortized payment, paying both principal and interest. Two, you could pay the interest only and pay no principal. Or three, you could make a minimum payment based upon a lower interest rate. If you choose the third option, the difference between an interest only payment and your minimum payment would be added onto your loan.
One feature of a fixed rate option payment loan is that the borrower can calculate exactly how much interest will be deferred during the initial option payment period. Because of this, in a sense this type of loan becomes really no different than a second mortgage or cash out refinance where the borrower knows precisely how much their principal balance is being increased.
This program is often referred to as a Hybrid or Secure Option Arm. This does provide the flexibility of the different payment options as well as some stability knowing that your rate will be locked for a period of time.
There are even 30 year fixed rate mortgages with rates in the 6% to 7% range with minimum payment options as low as 1.95%.
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