This is a relatively new program available in the realm of Pay Option Mortgages. Traditionally Pay Option Mortgages have a monthly adjustable interest. This new program has a fixed rate for the life of the loan. This means that the only payment to adjust is your minimum payment. This rate will adjust annually. The remaining payments: Interest Only, 30 year and 15 year, will not adjust monthly based on interest rate changes.

This program strikes an excellent balance between the need for a low minimum payment option and the desire to have the stability of a fixed rate.

As with most Pay Option ARM's, the Fixed Rate Pay Option ARM also has a maximum loan balance limit. Depending on the bank and their loan programs, the limit is often set at 110% to 115% of the original loan amount. When a homeowner makes only the minimum payment every month, which is less than the interests owed for the month, the difference between interest owed and the minimum payment is added to the loan balance. When the amount owed reaches 110% to 115% of the amount originally borrowed, the payments would be re-calculated based on the higher loan balance, or loan is said to "recast".

Consumers who receive significant annual bonus income are excellent candidates for a fixed rate pay option arm.

By combining some of the best features of Option ARM Adjustable Rate Mortgages with the security and stability of a fixed rate for the life of the loan, 30 Year Fixed Rate pay option mortgages allow you to boost cash flow and defer interest without worrying about the huge increases in your underlying interest rate which are common with other loan programs offering similar payment options.

It has been touted for its many consumer-benefits. As many people today purchase homes with the intent to move, sell or refinance within the first few years, the ability to offer payment flexibility is increasingly attractive to borrowers.