A minimum paymen option mortgage is a loan that allows a borrower the option to make a minimum payment each month that is lower than the interest only level. The right to make a minimum payment is usually limited to several years.
When a mortgage bill arrives in the mail a borrower can pay at:
The interest rate on these loans is typically an interest rate index plus a margin.
A Minimum Payment Option Payment Example
This loan has:
A minimum payment rate of 1.25% has a monthly minmium payment of $1,166.
A minimum payment rate of 1.95% has a monthly minmium payment of $1,285.
A minimum payment rate of 2.50% has a monthly minmium payment of $1,383.
The annual minimum payment option usually is fixed for 12 months at a time, and increases slightly each year for several years.
For example, a minimum payment may be $1,100 in the first year, $1,200 in the second year, and $1,300 in the third year.
There are many free mortgage calculators available online to help you figure this out.