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What is a Texas Payment Option ARM loan program?This loan program is an adjustable rate mortgage with a repayment schedule that is usually based on a 30 year repayment schedule. The finance rate usually starts at a low rate and increases or changes on a predetirmined schedule. It also offers payment options to help you budget your monthly cash flow. With an option ARM you have a choice for each payment. Generally you may choose to pay only interest (and possibly less than that), interest plus a small principal ammount, or interest plus a larger principal ammount. Listed below are some examples of ARM payment choices:
One advantage of the option ARM is that its low introductory start-rate allows you to make very low initial mortgage payments, and low qualifying rates enable you to qualify for a larger home loan. A disadvantage of the ARM mortgage is that the payment could increase in future years. For this reason we often suggest a fixed rate mortgage. However there are times where the ARM is a good fit for a customers needs. Calculating the monthly payment: The payment during the first five years typicaly starts by calculating the payment using the initial low introductory rate, usually 1 percent to 2 percent. That will be your payment rate. Each year the payment will increase 7.5 percent for the first five years. (NOTE: some programs will have different terms).
In year six, the payment will then be calculated using the index rate plus the margin rate, and amortized over the remaining term of the loan. On a thirty-year loan, the remaining term is twenty-five years, and on a forty year loan the remaining term is thirty-five years. The note rate is the interest rate the bank will charge you each month. Some programs will use the introductory rate as the note rate for the first three months. After that introductory period, the note rate will then adjust to the index rate plus the margin rate.
Deferred Interest: The minimum payment option can help keep your monthly payments affordable. If the minimum monthly payment is not sufficient to pay the monthly interest due, you will then have deferred interest. That means the interest that was not paid will be added to the principal loan balance. Your loan balance increases each month. This is where the term negative amortized (NEG-AM) loan comes from. The balance increases, instead of decreases like in a normal loan. You can always avoid deferred interest by choosing the interest-only payment option. Payment Options: With the option ARM, you generally have at least two fully amortized payment choices, leading to a quicker loan payoff. If you prefer to pay off your loan on schedule, you can make the fully amortized payment based on a thirty- or forty-year loan, or you can choose the fifteen-year payment option for the fastest equity buildup. Option ARM loan programs may be right for you if you'd like to own your property only for a short time, and prefer affordability and flexibility in your monthly payment. However, if you select the minimum payment option in the early years, you should be prepared for increases in your monthly payments later. There is usually a prepayment penalty of you pay off, or refi the loan durring the first few years. This should be considered when deciding if this is the best program for your needs. Four types of payment options:
Minimum Payment
Interest-Only Payment
Fully Amortized Fifteen-, Thirty- or Forty-year Payment
Texas ARM Mortgage Rates Are Detirmined By The Index plus a Margin
The Margin is the number of percentage points (for example, 2.75) the lender adds to the index rate to calculate the ARM interest rate, or note rate, at each adjustment. The margin is fixed at the time the loan is funded. The interest rate you will be charged is the index rate plus the margin. The Payment Option ARM goes by several different names: Option ARM, PayOption, Pick-a-Payment, Neg Am Variable, Negative Amortized loan. If you are considering a Texas ARM loan, we suggest comparing the terms to a fixed rate program. Please call us at Texas Capital Mortgage for more information and current program rates. Link to Rate Freeze Information Compare advantages of other Loan Programs Calculate my payments with an Option ARM Loan  Texas Capital Mortgage - 28 FM 1960 West - Houston, TX 77090 Office Phone: 1- 866-433-0500 toll free Fax: 832-565-1656
Texas Mortgage Broker License #65252. We provide service for the entire state of Texas.
If you are looking for a houston mortgage, houston refinance, or a houston mortgage broker, then you have come to the right place! We are one of the top Texas lenders. 
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