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Last Updated: May 14th, 2012 - 22:24:01 |
When deciding on a mortgage loan these days, does the “Option,” in Option Arm provide enough benefits? Are these Benefits tangible
Any mortgage broker will laud to you the virtues of being free to choose between the four payments, options in the Option Arm home loan.
The minimum payment option, which is the lowest payment option you can choose each month. Next, the interest-only payment is the second lowest payment option and is equal to the amount needed to repay the interest due each month. And then third and fourth, we have the 15-Year and 30-Year Amortization payments, which are the normal, regular payment plans for your real estate investment. .
What are your many Benefits that you receive for qualifying for an Option Arm.
First, you get an inexpensive means for borrowing money to finance that investment property, or to consolidate your past due bills to become debt free. Imagine! You can borrow and your interest rates on home loans are characteristically much lower than for many other loans. The Cash Flow Option allows you to use leverage on your home mortgage debt so that you can pay the more urgent expenses like your high-interest credit cards or other non-tax deductible debt, your college, your medical treatments or your retirement.
Many sellers of investment properties use the cash to start up that business.
Secondly, the Cash Flow Option home loan gives you control over how you pay a more versatile portfolio of investment real estate mortgages:
Owner, non-owner, second homes
1-4 units
Purchase, rate and term and cash-out refinances
Thirdly, the Cash Flow Option Home Loan is Ideal For: Self-employed, Commission paid workers, Move-up Home Buyers and even borrowers with Consumer Debt. Why?
Because IT IS quite easy to qualify for.
And finally, you have the profit of much lower mortgage rates because it is an adjustable rate mortgage. The introductory best mortgage rate can be as low as 1%.
.An Option ARM allows you to push your home equity to work for you. If you only pay the minimum payment, then you are deferring interest. But wait! Your home appreciating. Thus, your home equity temporarily pays part of the payment for you.
The fifth point is that when you receive Deferred Interest, mostly the interest is a lower tax-deductible one.
The sixth benefit you realize is the low rate mortgage carries a Minimum Payment Change Cap. Most option ARMs say that the minimum payment will not increase or decrease by more than 7.50% unless the loan is in negative amortization.
The Seventh benefit is the known as the Recasting (or re-calculating of your loan,) Option ARM loans are recast every five years (or sooner, if the negative amortization limit is reached). This re-calculation is based on the outstanding principal balance, the remaining term and the fully indexed rate. When the loan is recast, the payment required to fully amortize the loan over the remaining term becomes the new minimum payment, and the payment cap does not apply (the payment cup, however, will go back into effect immediately after the recast, and will hold until the next time your loan is recast).
An Eight benefit is in the ability to refinance many times from 30 to a 40-Year Term
A ninth benefit is that many allow you to make Bi-Weekly Payments. Some lenders offer optional bi-weekly payment plans with option ARMs. With a bi-weekly mortgage plan, you pay half of the monthly mortgage payment every 2 weeks. This allows you to repay a loan much faster. For instance, a 30-year loan can be paid off within 18 to 19 years.
To conclude, a tenth benefit is that some interest is filed as tax deductible. Yes, there are many benefits to using an Option Arm today.
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