More and more California home owners are turning to a Pay Option adjustable rate mortgage (ARM) loan when refinancing to cash out or to lower monthly payments.
This increase of people refinancing in California using a Pay Option home loan is because the program gives the homeowner the choice to make one of four different payments every month.
The Pay Option ARM refinance home loan is a relatively new product that allows you four payment options each month:
1. 15 year payment- Pay your home loan off and build equity faster as well as save thousands of dollars in interest;
2. 30 year payment- This option will let you know how much to pay to have your home free and clear in the standard thirty years;
3. Interest only option- This option allows you to pay only the interest portion of your monthly payment so you can increase monthly cash flow;
4. 1% Minimum payment-This option allows you to pay your mortgage at a 1% rate of interest for maximum savings.
All types of borrowers are taking advantage of a Pay Option refinance, but the two most common are self-employed/commissioned borrowers and those that with a current financial position where they need the absolute lowest payment.
Pay Option ARM mortgage loans are ideal for the self-employed, Generally the self-employed have fluctuating income and this program allows a mortgage payment that is consistent with cash flow.
For instance a self-employed California contractor who is busy during the spring and summer, but due to weather conditions in the winter business slows down. When business is going well the contractor can make a fully amortized payment but when business is slow he can take advantage of the new low deferred interest payment. It gives him great flexibility to make the mortgage payment he wants depending on his monthly cash flow situation.
In addition to refinancing those looking to buy a new home or even a first time home buyer and want the lowest possible monthly payment.
Although the California Pay Option Refinance Loan is the absolute best adjustable rate mortgage ( ARM ) product currently available borrowers should remember to use the program to their advantage. If they only make a minimum deferred payment then the deferred interest will be added to their principal balance at the end of 5 years.