OPTION ARMS   

No Longer Available    Start Rates from 1% to 2%

And Good Riddance

 These Option Loans are cancelled and many loan officers say thank goodness as they are responsible for part of the mortgage crisis

OPTION ARM: The Negative Amortization product line consists of Option ARMs tied to either the 12-MTA ,11th District Cost of Funds Index (COFI) or the LIBOR index. Some Option ARM's have "No Negative Amortization" and have low start rates from 1.50%. 

12-MTA index is based on yields published in the release entitled the �Selected Interest Rates-H15� which is published by the Federal Reserve Board on the first Tuesday of each month.  

COFI is based on the interest paid by savings & loan institutions within the Federal Home Loan Bank�s 11th District territory (which is comprised of CA, AZ and NV) on their savings Deposits and money borrowed from other sources.

London Interbank Offered Rate (LIBOR) indexes: The LIBOR (pronounced LIE-bore) tracks the rates at which London banks pay to borrow one another's reserves. It fluctuates more rapidly than the COFI or 12 MAT. The LIBOR is sort of a rough equivalent of the federal funds rate in the United States, but it is set by the market, not a government entity.

• Option #1 Minimum Payment

Gives you more money to work with each month. First year's minimum payment based on the initial start rate. The minimum payment for the year will be established annually. At each subsequent annual adjustment, the minimum payment is based on the chosen Index plus margin. Payments limited to a 7.50% adjustment annually. (e.g. - if your minimum payment is $1000, the highest you will pay in the 2nd year is $1,075. )

• Option #2 No Deferred Interest

Pays all interest for the current month. Payments remain manageable with no change in your principal balance for the month. No deferred interest occurs with this choice.

• Option #3 Pays Your Interest & Principal

Pays off your loan within the 30-year time frame. Fully amortizing 30-year principal and interest payment. Payment based on the chosen Index plus margin, which is calculated monthly. No deferred interest occurs with this choice.

• Option #4 For Quick Equity

For the fastest equity build-up (leading to a quicker loan payoff). Fully amortizing 15-year principal and interest payment. Payment based on the  Index plus margin, which is calculated monthly. No deferred interest occurs with this choice.

The four options let you decide every month how to tailor your mortgage payments to achieve your short and long-term financial goals.

NEW !!! - Stated Income Option ARM - up to 95% financing

How does it work?
Every month, your lender will send you a monthly payment coupon offering your the four options discussed above.

The following example illustrates the four options available for a $200,000 mortgage. The COFI Index ³ was applied to this example with an indexed rate of 3.481% and a margin of 2.75%. Our fully indexed rate is 6.231% and the start rate on the minimum option is 2.95%. Payment due by 1/01/03. Minimum amount due: $837.82.

NOTE: Currently, there is high risk of default with these exotic loan types vs. choosing a fixed hybrid arm or a fixed rate loan.

 

  To Begin your Loan Application 

You will have a response quickly within 24 hours*.

In addition to the information on the coupon, your monthly statement will also contain account activity that occurred since the last statement: i.e., beginning and ending balance amounts; previous payments; interest paid; current ARM interest rate; escrows/other, etc.

How Is The Interest Rate Determined?
The Option ARM Loan uses a monthly Adjustable Rate concept to determine the actual rate of interest charged. In the above example we used the Cost of Funds Index (COFI). Other commonly used indices include the Monthly Treasury Average (MTA) and London Interbank Offered Rate (LIBOR). Your loan expert will determine the index and program that best fits your individual financial situation. A fixed amount of percentage points (the "Margin") is added to the index which when combined with the indexed rate, established your effective interest rate and as such your monthly payment.

Current MTA Indexed Rate = 4.011% plus 2.750% margin = Fully Indexed Interest Rate 6.761%.  (Contact Us to see a comparison)

Who Should Choose the Option ARM Loan and Why?

Anyone who wants to take control of their monthly cash flow and financial future. As noted, "The Option ARM Loan" gives you the flexibility to decide whether you would like to match your loan payments to your variable or seasonal income or whether you would like to put more money into investments or toward large expenses. The choice is yours! Talk to one of our loan experts about your financial goals and learn how the Power Option Loan can help you reach them. The maximum loan amount depends on the property value, income documentation ( "Full documentation" or "No Income Verification" are applicable) and other factors.

Available Indexes: 12-MTA, LIBOR or COFI

    Periods: 1, 3, 6, and 12 month available with 12-MTA or LIBOR index

��������������� 1 and 3 month available with COFI index

    12 Month MTA Index:  3.75%³

    11th District COFI:  3.296%³

    1 Month LIBOR: 4.572%³

¹ Consult your tax advisor.
² Option One - Use of this option could result in deferred interest. This amount would be added to your loan balance.
³ COFI Index rate in this example is based on Jan, 2002 figures. *Payment options are subject to change and may vary depending on the program and lender. All other indexes are subject to change without notice

^**No Closing Costs Option ARM is conditioned on margin selected

All examples assume a 28% tax bracket and that mortgage interest is fully tax deductible. Thirty-year loan would require 360 monthly payments in the amount indicated. Interest rate may increase after consummation of loan. Other terms and limitations may apply.