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Tips on how the option mortgage works.

This is one the most complicated loans out there, but when you truly understand it, you'll learn to appreciate it. First, I want to ask, do you like having options? Of coarse you do. That's what this loan is all about, hints the "option mortgage". When your regular monthly mortgage statement arrive, you'll have a payment enclosed with only one payment option and the due date. With the option mortgage loan you'll have four payments to choose from. Your first payment is the best payment because its' the lowest payment of all four. It's called your start rate payment and it could be as low as 1% and as high as 4% but this is the complicated part. When you pay the start rate "1%" you defer interest, which adds the remaining payment to the loan balance. Here is an example, your loan amount is $300,000 your start rate payment is at 1%, so your minimum payment due is only $964.00, nice isn't it. What you must know is that the 1% is not the interest rate. it's your start rate. With every option mortgage there is a start rate and an interest rate. Your interest rate on this loan program could be 5.5%apr to 7.95%apr depending on the lender or broker. Let's say it's 5.5%apr, so off the loan amount of $300,000 which brings you to your 2nd payment option, interest only, which is $1,375. To calculate how much of your payment goes to the loan balance after paying the minimum payment is easy. You minus the interest only payment to the start rate payment. $1,375-$964.00=$411.00 which will go to the loan balance each time you pay the minimum payment. Now that the hard part is over, the 3rd and 4th payment options are easy. The 3rd payment is exactly like paying on a 30 year fix and the 4th payment is like paying on a 15 year fix to payoff your loan quicker. Once you overcome how the option mortgage really works you'll love it. Based on our example above your new monthly statement will look like this.

Loan amount $300,00
Minimum payment due: $964.

Option 2 interest only $1,375
Option 3 30 year fix $1,703
Option 4 15 year fix $2,456

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