The MTA-indexed Option ARM offers five monthly payment options. To make the decision that is best for you, you will need to understand the features and benefits of each option. The following is an illustration of your monthly loan statement and a brief description of the options that may appear.
Option 1 - Keeps payments manageable
The "Minimum" monthly payment option will give you more cash now and keep your monthly payments manageable. The 7.5% payment cap limits how much the Minimum payment option can increase or decrease each year. At times, the payment amount change allowed by the cap may not be enough to fully amortize the loan. Then a portion of the interest will be deferred, and added to the balance of your loan.
Option 2 - Pays all the interest
At those times when the Minimum monthly payment is not sufficient to pay the monthly interest due, you can avoid deferred interest by paying the Minimum monthly payment and any additional interest accrued during the month (same as interest-only payment). Your payments remain manageable, with no change in your principal balance for that month.
Option 3 - Pays principal too
This is the fully amortized or P.I. payment (Index + Margin.) It is calculated each month based on the prior monthís interest rate, loan balance, and remaining loan term. When you choose this option, you pay all the interest due and reduce your principal, to pay off your loan on schedule.
Option 4 - Builds quick equity
For faster equity build-up, quicker payoff and substantial interest savings choose the largest monthly payment option. Option 4 is calculated to amortize your loan based on a 15-year term for the first payment due date.
Option 5 - Builds even quicker equity
For even faster equity build-up, and quicker payoff, or to lower your future monthly payments, you will always be allowed to pay any amount over the Minimum payment. Just add an extra payment anytime you like. All payment options will pay your house off in 30 years or less.