What is an Option ARM mortgages?
The option ARM is a loan that is an adjustable rate mortgage with the added flexibility of a variety of payment options on your monthly mortgage. The gist of these mortgages was to increase the flexibility of your monthly payment. These loans have a low introductory rate that allows you to make very low initial payments and the low qualifying rate also allowed many people to buy more home than they could otherwise afford with more conventional mortgages. When I show you a real case example of an Option ARM, you will completely understand why these mortgages had no place in the marketplace. The option ARM has four major type payment options: (a) Minimum payment – the initial minimum payment is set for the first 12 months usually with the initial interest rate. After that the payment changes on an annual basis with payment caps that limit increases or decrease each year. Keep in mind the minimum payment was selected by many borrowers during the initial months and many times did not even
