Interest
only home loans offer consumers greater purchasing power, increased
cash flow and a number of other benefits. Not for everyone, but
extremely beneficial to the people these loans are tailored for.
The mortgage market has a number of programs available to consumers
and below is a list of some of the most popular loan types:
1 MONTH ARM - INTEREST ONLY OPTION The interest rate on this loan is the sum of the LIBOR index
plus a margin rounded to the nearest one-eighth of one percentage
point, (0.125%). The margin will not change throughout the term
of the loan. the index value will be adjusted every month, which
will cause the interest rate to be adjusted every month.
6 MONTH ARM - INTEREST ONLY OPTION
The interest rate on this loan is the sum of the LIBOR index
plus a margin rounded to the nearest one-eighth of one percentage
point, (0.125%). The margin will not change throughout the term
of the loan. the index value will be adjusted every six months,
which will cause the interest rate to be adjusted every six months.
3 YEAR ARM - INTEREST ONLY OPTION
The interest rate is fixed for the first three years of the loan
term. Years 4 thru 30 the interest rate is adjusted every year
to the sum of the LIBOR index plus a margin rounded to the nearest
one-eighth of one percentage point, (0.125%). The margin will
not change throughout the term of the loan. During the first five
years of the loan, the borrower is offered an interest only payment
option and a principal and interest payment option. Years 6 thru
30 require a principal and interest payment.
5 YEAR ARM - INTEREST ONLY OPTION
The interest rate is fixed for the first five years of the loan
term. Years 6 thru 30 the interest rate is adjusted every year
to the sum of the LIBOR index plus a margin rounded to the nearest
one-eighth of one percentage point, (0.125%). The margin will
not change throughout the term of the loan. During the first five
years of the loan, the borrower is offered an interest only payment
option and a principal and interest payment option. Years 6 thru
30 require a principal and interest payment.
7 YEAR ARM - INTEREST ONLY OPTION
The interest rate is fixed for the first seven years of the loan
term. Years 8 thru 30 the interest rate is adjusted every year
to the sum of the LIBOR index plus a margin rounded to the nearest
one-eighth of one percentage point, (0.125%). The margin will
not change throughout the term of the loan. During the first five
years of the loan, the borrower is offered an interest only payment
option and a principal and interest payment option. Years 6 thru
30 require a principal and interest payment.
MTA - Option ARM
This MTA ( Monthly Treasury Average Index ) based Adjustable
Rate Mortgage offers the borrower several payment options. These
options include a minimum payment and a principal and interest
payment that is adjusted monthly. Under certain conditions the
borrower may be offered an interest only payment option.
The interest rate on the loan is the sum of the MTA index plus
a margin. The margin will not change throughout the term of the
loan. The index value will be adjusted monthly, which will cause
the interest rate to be adjusted monthly.
The minimum payment option is adjusted annually with a payment
cap adjustment of 7.5% of the prior years payment. Every five
years the payment cap is suspended in order to insure that the
loan will be paid off at the end of the loan term. Because the
interest rate will be adjusted monthly, the minmum payment may
or may not cover the amount of interest being charged. If the
minimum payment does not cover the amount of interest being charged,
paying the minimum will result in negitive amortization. This
simply means that the balance on your loan will increase in the
amount of the difference between the minimum payment and the interest
charge on the loan that month.
The principal and interest payment option is available every
month. Since the interest rate is adjusted monthly, this payment
is adjusted accordingly. This payment option will pay the loan
off based on a 30 year amortization.
The interest only option is not available every month. This option
is only available when the minimum payment does not cover all
of the interest charge that month.
COFI - Option ARM
This COFI (Cost Of Funds Index) based Adjustable Rate Mortgage
offers the borrower several payment options. These options include
a minimum payment and a principal and interest payment that is
adjusted monthly. Under certain conditions the borrower may be
offered an interest only payment option.
The interest rate on the loan is the sum of the COFI index plus
a margin. The margin will not change throughout the term of the
loan. The index value will be adjusted monthly, which will cause
the interest rate to be adjusted monthly.
The minimum payment option is adjusted annually with a payment
cap adjustment of 7.5% of the prior years payment. Every five
years the payment cap is suspended in order to insure that the
loan will be paid off at the end of the loan term. Because the
interest rate will be adjusted monthly, the minmum payment may
or may not cover the amount of interest being charged. If the
minimum payment does not cover the amount of interest being charged,
paying the minimum will result in negitive amortization. This
simply means that the balance on your loan will increase in the
amount of the difference between the minimum payment and the interest
charge on the loan that month.
The principal and interest payment option is available every
month. Since the interest rate is adjusted monthly, this payment
is adjusted accordingly. This payment option will pay the loan
off based on a 30 year amortization.
The interest only option is not available every month. This option
is only available when the minimum payment does not cover all
of the interest charge that month.
COSI - Option ARM
This COSI (Cost Of Savings Index) based Adjustable Rate Mortgage
offers the borrower several payment options. These options include
a minimum payment and a principal and interest payment that is
adjusted monthly. Under certain conditions the borrower may be
offered an interest only payment option.
The interest rate on the loan is the sum of the COSI index plus
a margin. The margin will not change throughout the term of the
loan. The index value will be adjusted monthly, which will cause
the interest rate to be adjusted monthly.
The minimum payment option is adjusted annually with a payment
cap adjustment of 7.5% of the prior years payment. Every five
years the payment cap is suspended in order to insure that the
loan will be paid off at the end of the loan term. Because the
interest rate will be adjusted monthly, the minmum payment may
or may not cover the amount of interest being charged. If the
minimum payment does not cover the amount of interest being charged,
paying the minimum will result in negitive amortization. This
simply means that the balance on your loan will increase in the
amount of the difference between the minimum payment and the interest
charge on the loan that month.
The principal and interest payment option is available every
month. Since the interest rate is adjusted monthly, this payment
is adjusted accordingly. This payment option will pay the loan
off based on a 30 year amortization.
The interest only option is not available every month. This option
is only available when the minimum payment does not cover all
of the interest charge that month.
10/30 Year Interest Only Arm
* The initial payments are interest only for the first 10 years.
* After the completion of the interest only period, the unpaid
balance is fully amortized over the remaining term of the loan.
* The Borrower may make voluntary principal payments during the
interest only period. The required interest only payment will
be reduced to reflect the decrease in the principal unpaid balance.
