PAY OPTION ARM CALCULATOR
HELPING YOU UNDERSTAND NEGATIVE AMORTIZATION LOANS
An Introduction to the Pay Option Arm
If you are thinking about buying or refinancing a home using the PAY OPTION ARM or OPTION ARM mortgage, you've come to the right site. We have articles, books, ebooks, and a calculator that helps you understand the Pay Option ARM mortgage.
To understand the Pay Option Arm, you need to understand the following concepts:
Adjustable Rate Mortgage: An adjustable rate mortgage is a loan with a rate that can go up or down.The adjustable rate mortgage requires an index and a margin. The index adjusts on a monthly basis while the margin will always stay the same. Every month you should expect the index to change. When the index changes, the rate will change.
Teaser Rate: The 1% rate ads that have heavily saturated the internet, newspaper, television, and radio is considered the start rate or teaser rate. This rate stays the same. You're allowed to pay a minimum payment of 1%. However, if you decide to pay the minimum payment you are accruing negative amortization.
Negative Amortizatiton: negative amortization is an increase in the balance of a loan caused by adding unpaid interest to the loan balance; this occurs when the payment does not cover the interest due.
Four Payment Options: Unlike a traditional mortgage, the Pay Option Arm affords you 4 payment options. The teaser rate payment. The interest only payment based on the rate calculated from the index and margin. The 30 year payment based on the rate calculated from the index and margin. The 15 year payment based on the rate calculated from the index and margin .
By understanding these concepts: the one month adjustable rate mortgage, the teaser or start rate, negative and the four payment options, you will have the foundation of knowledge necessary to help you decide if Pay Option Arm Mortgage is the right loan for you! Visit our archives to learn more of if you're ready, apply for a loan.
To understand the Pay Option Arm, you need to understand the following concepts:
Adjustable Rate Mortgage: An adjustable rate mortgage is a loan with a rate that can go up or down.The adjustable rate mortgage requires an index and a margin. The index adjusts on a monthly basis while the margin will always stay the same. Every month you should expect the index to change. When the index changes, the rate will change.
Teaser Rate: The 1% rate ads that have heavily saturated the internet, newspaper, television, and radio is considered the start rate or teaser rate. This rate stays the same. You're allowed to pay a minimum payment of 1%. However, if you decide to pay the minimum payment you are accruing negative amortization.
Negative Amortizatiton: negative amortization is an increase in the balance of a loan caused by adding unpaid interest to the loan balance; this occurs when the payment does not cover the interest due.
Four Payment Options: Unlike a traditional mortgage, the Pay Option Arm affords you 4 payment options. The teaser rate payment. The interest only payment based on the rate calculated from the index and margin. The 30 year payment based on the rate calculated from the index and margin. The 15 year payment based on the rate calculated from the index and margin .
By understanding these concepts: the one month adjustable rate mortgage, the teaser or start rate, negative and the four payment options, you will have the foundation of knowledge necessary to help you decide if Pay Option Arm Mortgage is the right loan for you! Visit our archives to learn more of if you're ready, apply for a loan.