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Cash Flow Option Loan
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Cash Flow Option Loan - "I was offered a Cash Flow Option Loan. What does this mean, and how does it affect my payments?"Cash Flow Option Loans may have adjustable rates, however there are fixed rate cash flow option loans available.
Cash Flow Option loans are another name for Pay Option or Pick a Pay mortgages. A Cash Flow option loan is notable for its four different payment options each month, which include Interest Only, Fully Amortized, 15 Year Principal & Interest, and the famous "Minimum Payment" or cash flow payment, which allows borrows to defer interest by trading equity for cash at any time prior to the loan's recast date, often 5 to 10 years. The adjustable rate Cash Flow Option ARM, long a favorite of the wealthy, has received negative press for being marketed by unscrupulous lenders to the poor, however the negative amortization characteristics of Cash Flow loans are highly desirable to high net worth individuals and professionals whose income is derived from large annual bonuses, dividends, long term capital gains, business income and other sporadic or irregular income. Fixed Rate Cash Flow Option mortgages are a highly popular refinance tool for borrowers who desire the flexibility of a classic cash flow mortgage but desire the security of a fixed rate over the uncertainty of an adjustable rate mortgage. Contact a financing advisor at (800)515-8443 for more information about Cash Flow Option Loans.
A Cash Flow Option Loan allows you to make minimum payments as desired which defer a portion of the interest that would otherwise be payable for the month. Very often this will reduce your minimum mortgage payment for that month by up to half or even more, which provides a great security blanket for borrowers who experience an unforeseen interruption in their income due to job loss, seasonal business issues, stock market declines, or just a bad month. However it should be noted that you cannot defer interest in perpetuity, often you will be limited to deferring 10% to as much as 35% of the loan amount at which point the minimum payment cash flow option will no longer be available. Any deferred interest will be added to your loan balance, and must be paid off either by refinancing the debt or by making larger payments down the road.