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| | Many
people find the process of getting a loan to be confusing and, sometimes, a little
intimidating. Our
"Home Loan U" will provide you with some of the information you need
so you know what to expect and how to make wiser decisions. | |
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Pay Option
Home Loan
The Pay Option loan program is a fixed/adjustable (hybrid) rate
mortgage with the added flexibility of being able to make one
of several possible payments on your mortgage each month, allowing
you to better manage your monthly cash flow.
The low introductory “Start Rate,” allows you to make
very low initial mortgage payments. The low qualifying rates enable
you to qualify for a more valuable home. Your Minimum Payment
Rate may vary from 3.95% up to 5.95% and depends on your Loan-to-Value
Ratio (LTV). Keep in mind that the initial interest rate changes
after the first month.
The minimum payment option can help keep your monthly payments
affordable. The minimum monthly payment is not sufficient to cover
the monthly interest due. You can avoid the burden of deferred
interest by choosing the interest-only payment option as long
as the interest-only payment is not less than the amount of the
minimum payment due.* The interest only payment may change in
3 or 5 years to your fully indexed rate.
With most Pay Option loans making only the minimum payment amount
in first five years will increase your principal balance.
With an Pay Option Loan, you generally have at least two fully
amortized payment choices, leading to a quicker loan payoff. If
you prefer to pay off your loan on schedule, you can make the
fully amortized payment based on a 30-year loan or you can choose
the 15-year payment option for the fastest equity build-up. Additional
principal payments will reduce the amount you need to pay in later
months.
All of the above referenced payment options should be clearly
marked on your loan statement, so its very easy to figure out
how much to pay each month. Pay Option Loan programs have become
very popular today, and there are many variations of this innovative
home financing product on the market.
*Please note that the interest-only payment option does not reduce
your principal.
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| | Useful
definitions: Closing
– Finalizing the transaction. Closing
Costs - Expenses (over and above the price of the property) incurred
by buyers and sellers in transferring ownership of a property. Also called "settlement
costs." Recording
– The act of making the transaction an official public record. Title
- A legal document showing a person's right to or ownership of that property. Want
to understand more terms? Visit our Glossary!
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