Does any one know anything on the pay option arm? I signed paperwork last night on a refinance and it looks confusing? Something with payment options per month? Help
2006-06-14 13:05:45 · 3 answers · asked by eric k 3 in Business & Finance ➔ Personal Finance
Some better info is that an option arm gives you 4 payment options each month. There is a minimum payment that usually based on a pre determined amount of interest like say 3%. They take your loan amount based on a 30 year mortgage at the 3% and you get a nice little payment. The problem is that this is considered a neg-am loan which means you are going backwards. SOme loan companies recast your loan every year to avoid this (World Savings Bank for 1) by adding 7% to the minimum payment and this loan will not g oneg am. the second payment option is interest only, the third payment option is 30 year am, and the 4th option is a 15 year am. By paying the minimum payment everytime you will not be a happy camper over time. The loan is designed for aggressive investors and folks on a commission who have ups and downs in their pay. If you want more info let me know.
2006-06-19 07:26:42 · answer #1 · answered by unclejesse1 3 · 0⤊ 0⤋
A pay option Arm gives you the option of paying interest only for a fixed term, usually 3 or four years. The advantage is it puts more money in your pocket, which you can use to pay off CC or invest in a retirement fund ect.. At the end of the term you have the option of refinancing. This is another advantage because you really don't have to worry about excelling interest rates, they don't matter because you are not paying principal and interest. This is great for someone that does not plan on keeping their home for life. The average person does not keep their home, forever, they upgrade and sell. However if you are considering rental property or paying your home off for retirement purposes or for will purposes to your heirs, this is not for you.
2006-06-14 20:28:05 · answer #2 · answered by crystal b 2 · 0⤊ 0⤋
it's a poison apple/ exotic loan designed to keep you in debt. example: you start at a 30yr loan, 5 yrs later you refinance, you still have 30yrs left and not 25. plus because it was interest only payments you have not paid down any principle. in short, pay option=debt forever or foreclosure on the home.
2006-06-14 23:48:46 · answer #3 · answered by thedoc64118 2 · 0⤊ 0⤋