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Who Can Benefit from a Pay Option ARM?

 

Self-employed borrowers with inconsistent income
Borrowers with inadequate or no retirement savings
Borrowers who want cash reserves for emergencies
Borrowers who need money to start or expand a business
Borrowers who need mortgage payments to be as small as possible
Borrowers who want to stop using high interest credit cards
Borrowers seeking financial flexibility

The great thing about the Pay Option ARM is that it can benefit most people. Because of its flexiblity, it can be catered to meet the needs and goals of most people. I personally like the Pay Option ARM because it gives me more cash flow on my rental property and I have more money to invest in other properties or investments.

This loan can be great, however, when the market is hot! Often times you can get into an investment property, pay less than the current rent rates, and still gain value in the property. This is a great tool for leveraging cash when trying to buy multiple rental properties. Once the market turns, you can refinance the properties into traditional mortgages and cash out on the refinance to cover any deficiencies between your new mortgage payments and the rent you are collecting.

However, it really needs to be conveyed that this loan is NOT meant for everyone. The PayOption mortgage can have its down falls and if you are not the type of person who is very involved with their finances, you might want to consider a 3/1 or 5/1 Interest only ARM.

The pay option arm is a great alternative for those considering a Reverse Mortgae giving them a much lower payment option.

My estimate would be that in the state of California, somewhere near 70 per cent of homeowners could benefit from an Option ARM loan program. I base this on the fact that monthly cash flow is a problem as evidenced by the high credit card debt that some many households are carrying.

In an area of high appreciation using an Option Arm on an investment property allowing it to have a positive cash flow while the property is being rented out and selling the rental after a period of time may be an advantageous way to use an Option ARM.

One of the negative effects of this mortgage can be the negative amortization of your mortgage over time. This, in simple terms, is adding debt to your property, and can happen if you always pay the lowest payment, as it is usually 1-3% interest rate. The difference between what your fully amortizing rate is, and this low rate, will be the debt added to your home.

One of the hottest mortgage programs on the market these days is the option arm mortgage. Alternatively you may have heard of option ARMS by the names "Pay Option ARM" "Payment Option ARM" "12 Month MAT" or "Pick-A-Payment Mortgage". And we've discovered that there are at the least 4 compelling reasons why smart and savvy borrowers are flocking to Option ARMS... these pick-a-pay loans give the borrower 4 different payment amounts to choose from every single month.

The First Payment Option is based on a start rate as low as 1%, sometimes even less, depending on your credit and a few other factors. Your Second Payment Option is usually on an interest only choice. Pay Option Three is generally a principal and interest payment choice amortized over 30 or 40 years depending on the program you select. Finally, for those times when you have extra money available and you want to pay down your principal and build equity faster, the fourth choice is a pay option based on the 15 year amortized payment to pricipal and interest. In Summary, an option arm provides you with flexible options every month, which help to manage your cash flow and monthly budget with more control. And you can get a lot more house for your money, or free up that cash flow to start your own business or make investments.

The best way to put a pay option arm mortgage to work for you is to talk with one of our experienced option arm experts who will design a personalized program just for you based on your own individual or your family's goals, income, monthly bills and future housing or investment property plans.

Pay Option ARMs are great for many borrowers. Another common situation is borrowers who own a rental property. The flexibility and minimum payments can be used to maximize cash flow from the property and or to off set additional expenses such as repairs.

Pay Option ARM is also referred to as a Pick a Payment loan. It gives the borrower the option to make one of four payment types every month, (1) minimum payment, (2) interest only payment, (3)payment based on 30 year amortizations, and (4) payment based on 15 year amortizations.

Due to the large number of recent entrants into the California real estate market over the past few years, and the extensive use of Payment Option / Minimum Payment & Interest Only mortgage types in the state, housing prices in the state aer significantly higher than most surrounding areas on the West Coast. Many borrowers are able to use the minimum payment option available on these loans to dramatically reduce their housing costs for several years.


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