Cash Flow Option Fixed Rate Refinancing
Purchase or Refinance with Minimum Payments from 0.25%
Defer Interest & Take Advantage of Negative Amortization to Cut Your Mortgage Payment in Half, Separate Cash from Equity, Improve Cash Flow & Provide Flexibility in Your Payment Options
Option ARM is a general name for a category of mortgages which are also marketed as Pay Option, Cash Flow ARM, Fixed Rate Option ARM, Smart Choice, Pick a Pay, Secure Advantage, 1 Month MTA and many other names. The family of mortgages to which Option ARM loans belong has long been a favorite of higher net worth individuals, business owners, and real estate investors under the names "Payment Cap ARM", "Deferred Interest Mortgage" and "Negative Amortization Loan", however their popularity has exploded due to much more widespread availability over the past 5 years. Once a specialized financial tool of the wealthy, Option ARM mortgages now come in an impressive variety of shapes and sizes. In fact, most of R1's "Option ARM" mortgages are not ARM mortgages at all, but in fact 30 Year Fixed Rate Mortgages with Cash Flow Options. No matter what you call them, Option ARM-type loans all have at least one thing in common: multiple payment options which allow you, the borrower, to choose how much you will pay each month by deciding whether to defer or pre-pay interest on a month by month basis.
Typical Payment Options for $500,000 with Typical Option ARM Mortgage:
- Minimum Payment: $1,848.10
- Interest Only Payment: $3,240.42
- 30 Year Payment: $3,591.39
- 15 Year Payment: $4,714.11
How do Payment Options Work on an Option ARM Mortgage?
Each month, you select from the available payment options. The Interest Only payment is the amount of interest which is due in a given month. If you would like to defer interest in any given month, you would select the minimum payment, and the interest which you do not pay in that month will be payable when you sell the home, refinance or when the loan recasts. If you want to pay down the balance of the mortgage at any time, you would select the 30 Year or 15 Year payment. You may also make annual pre-payments of up to 20% of the balance of the loan with no pre-payment penalty on most Option ARM loans.
How are R1's Cash Flow Mortgages Better than the Competition?
- Start Rates from 0.25%* - 25% lower payments than average
- Fixed Rates for up to 30 Years - minimizes negative amortization
- Defer Interest for up to 10 Years or up to 135% of the amount borrowed - double the competition
- Borrow Up to 100% of Your Home's Value - for qualified borrowers
- Stated Income, Passive Income & No Income Documentation Available - 4 in every 5 applicants qualify
- Available to Retired, Disabled and Fixed Income Borrowers - no employment required programs
- No Out of Pocket Closing Costs on Most Refinances - keep your cash in the bank
- FREE APPRAISAL - For a Limited Time - 30 year Fixed Rate Cash Flow applicants only
- Borrow up to $20 Million or more - visit R1 Private Client Group for loans larger than $1 Million
* 0.25% minimum payment option not available in all markets . Offer assumes qualifying credit.
Payment Options for $500,000 with R1's 0.25% Option ARM Mortgage:
- Minimum Payment: $1,441.77 - Up to 25% lower than average
- Interest Only Payment: $2,865.42
- 30 Year Payment: $3,285.31
- 15 Year Payment: $4,459.83
As you can see the 0.25% minimum payment option allows you to defer half of the month's interest, lowering the minimum required mortgage payment by as much as half in any given month!
Option ARM mortgages, whether Fixed Rate or Adjustable, are sophisticated financial tools which offer many borrowers the best mix of low payments, flexibility, and cash flow. However they are very specialized mortgages, and require a true expert to explain and educate you about your options.
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One Percent or Lower (0.25%) Fixed for 5 Years
The Lowest Minimum Payments. Cash Flow option mortgages are available with minimum payment rates as low as 0.25%*
The Longest Fixed Rates. 30 Year Fixed Rate Cash Flow loans available with 1.95% minimum payment!
Get More Information from the Low Payment Experts. Call (800)515-8443
Frequently Asked Questions about Option ARM Mortgages
Do all Option ARM Mortgages Have an Adjustable Rate?
No, in fact the majority of Cash Flow & Pay Option Mortgages offered by R1 are in fact either Fixed Rate for 30 Years or Fixed Rate for the first 3, 5, 7 or 10 years.
Are all Option ARM Minimum Payments One Percent?
No, minimum payment options are available from 0.25% up to 5% depending on the specific needs of the customer, geographic location and qualifying credit.
Are Fixed Rate Option ARM Mortgages Right for Everyone?
No, Option ARM loans are incredibly flexible financial products, however they do not make for a good fit for all borrowers and home owners. When you select the minimum payment on an Option ARM, you are deferring interest. This means you don't have to pay the interest now, however the interest you have not paid is rolled into the balance of your loan so that you can pay it later, upon the sale of the property, the next time you refinance, or when the loan recasts. If you do not have equity in your property, do not feel comfortable with or do not understand how not paying all of the interest due on your mortgage may increase the balance of the mortgage over time, chances are am Option ARM-style mortgage may not be a good fit for you. If you cannot afford to make a full interest only payment at least 5 years from the time you refinance into a payment option mortgage, this mortgage would not be the best choice for you.
I've Heard Negative Amortization is Bad
The topic of negative amortization has received extensive media coverage in recent months, due primarily to the use of pay option mortgages by borrowers who have not been educated on their use or who may have been sold a negative amortization loan without their knowledge. Negative amortization is simply the act of deferred interest being added to a mortgage balance, and the criticism in the media is directed mostly at the "classic" Option ARM, which is an Adjustable Rate Mortgage. Because the minimum payment on these traditional Option ARM mortgages does not change frequently, but the rate may change as much as once a month, many borrowers who were not educated about their mortgages by their lenders were surprised when their mortgage balances rose after deferring interest for several months. The ability to defer interest is a privilege extended to borrowers with qualifying credit and an ability to make use of deferred interest. Like a sharp knife, a Fixed Rate Pay Option mortgage can be a powerful tool in the hands of an educated borrower, but may allow an improperly informed or outright deceived home owner to cut themselves. While the majority of pay option mortgages provided by R1 are Fixed Rate mortgages for up to 30 years, we also require that prospective borrowers complete a through financial evaluation and consultation and are thoroughly educated on the proper use, risks and rewards of negative amortization loans prior to underwriting. There is no charge or obligation for this consultation, however consultation and disclosure are mandatory prior to approval of a new customer.
So Who Benefits the Most from Fixed Rate Option ARM Mortgages?
Borrowers from many walks of life can benefit from Fixed Rate Option ARM mortgages, however the types of borrowers for whom this mortgage is a natural fit include the following:
The Self Employed - Option ARM Mortgages can be a very powerful tool for self employed borrowers, business owners, and borrowers whose income depends substantially upon performance based lump-sum compensation such as quarterly or annual bonuses.
Passive Income Earners - Beneficiaries of passive income from dividends, investments, trust funds, annuities etc. are also in a position to take advantage of Option ARM mortgages.
How Can a Fixed Rate Option ARM Help Me Survive a Loss of Income?
One of the least talked about, but most important benefits of Fixed Rate Option ARM Mortgages is the insulation they provide to borrowers in the event of a temporary interruption of income caused by an unforeseen emergency such as a short term illness injury or disability, layoff, job loss or seasonal decline in business revenue or self employment income. Expensive occurrences such as a death in the family also can severely impact monthly cash flow. Because very few American families have the substantial cash reserves in savings necessary to handle "rainy days", the minimum payment option available on these cash flow mortgages allows borrowers to drop down to a much lower payment while times are hard. This ability to defer interest and make lower payments at will boosts cash flow when it is needed the most, and ensures that families not only can maintain their standard of living, but protects their credit rating from the major negative impact of late or missed mortgage payments, and can mean the difference between the pride of home ownership and the tragedy of foreclosure.
Can a Fixed Rate Option ARM Mortgage Reduce My Income Taxes?
Yes, in many cases. The interest which you defer when selecting a minimum payment option is still mortgage interest and may be tax deductible when you refinance or sell your home. More importantly, pay option mortgages allow borrowers who derive income from long term capital gains to make low minimum payments during the course of the year and make large lump sum payments from their annual distributions, dividends, or asset sales. By requiring less money for debt service during the year, borrowers can shift more if their income to be treated as long term capital gains, which are generally subject to significantly lower taxation than regular income (currently 5% or 15% depending on total income). We do not dispense personal tax advice, however your CPA may be able to advise you on how deferring mortgage interest or shifting income required for mortgage payments from income to long term capital gains may affect your personal tax situation.
Why Would I want to Separate Cash from Home Equity?
Home equity is a very inefficient asset, because it is not liquid, has a zero percent rate of return, and is fully at risk of housing price declines, disasters and hazards above and beyond the coverage of insurance. One of the most important habits of the wealthy is their acknowledgement that homes are liabilities, not assets, not investments. Cash on the other hand, is an asset, and can be utilized to dramatically improve your financial future through investment. One of the key benefits of negative amortization loans such as fixed rate Option ARM mortgages is that they allow you to separate more cash from equity than any other type of mortgage, while still maintaining flexible payment options and cash flow. The secret is the negative amortization cap, which allows you to defer from 10% to as much 35% of the balance of the loan, allowing you to borrow substantially more equity at a lower cost than any other type of mortgage.
One Percent or Lower (0.25%) Fixed for 5 Years
The Lowest Minimum Payments. Cash Flow option mortgages are available with minimum payment rates as low as 0.25%*
The Longest Fixed Rates. 30 Year Fixed Rate Cash Flow loans available with 1.95% minimum payment!
Get More Information from the Low Payment Experts. Call (800)515-8443
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April 14th, 2007
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One Percent or Lower (0.25%) Fixed for 5 Years
The Lowest Minimum Payments. Cash Flow option mortgages are available with minimum payment rates as low as 0.25%*
The Longest Fixed Rates. 30 Year Fixed Rate Cash Flow loans available with 1.95% minimum payment!
Get More Information from the Low Payment Experts. Call (800)515-8443
