what is option arm

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what is option arm

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Hi Todd,

Option ARM is one type of adjustable rate mortgage which provides the flexibility in making the payments. You can select between interest only payment, fully amortizing fifteen year or thirty year payments and the minimum payment plans. Depending on your payment capability you can select a payment option each month.

colin · Posted: Mon Feb 19, 2007 11:39 am Post subject:

Hi Todd,

Welcome to Mortgagefit forum.

In addition to what Dominey said let me add that initial rate on this type of loan is relatively lower than for other type of loans.

But this initial rate is only for the first month and starts to change on a monthly basis after that. If you select the minimum payment option then the interest rate changes on an annual basis.

You can go through this page to know all other details of Option ARMs.

Colin

jameshogg · Posted: Mon Feb 19, 2007 11:07 pm Post subject: RE: interest rate on option ARM

But I actually came to know that the initial rate is often applied for 3 months and 6 months after which the interest rate changes. That is, for a 1-month option ARM having a 1-month introductory period, the initial rate is applied for a month and after that the rate changes when the first payment becomes due.

However, for a 1-month option ARM with a 3 month introductory period, the interest rate changes when the 3rd monthly payment becomes due. After that, the interest rate changes on a monthly basis.

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