Pay-Option ARM

The reason this loan type is called an Option ARM is because every month there are 3 -4 payment options on the mortgage statement.  Option ARMs typically have a low introductory start rate, which enables borrowers to qualify for larger loan amounts.  ARM refers to adjustable rate mortgage which offer added flexibility.

Minimum Payment:  minimum payments can keep your payments affordable, but are not sufficient to pay the interest due.  Deferred interest is accrued onto the principal loan amount.  Minimum payments are set at 12-month intervals.  A payment cap limits how much it can increase or decrease.

Interest Only:  interest only will avoid deferred interest; interest on the loan is paid based on changes in the ARM index while the principal is paid off when the loan term ends. Fully Amortizing Payment (30 years) with fully amortizing payments both principal and interest are kept on loan schedule, payments are calculated monthly through the fully indexed rate.

Accelerated Amortizing Payment (15 years):  If you prefer to pay the loan on an accelerated schedule, and can afford higher monthly payments, 15 year payment option allows you to repay the loan twice as fast and save more than half the interest cost of a 30-year loan.