New Mortgage Loans
This newest loan is a payment feature on a minimum payment option loan.
The ability to skip the first 90 days of payments is added onto a regular minimum payment option loan.
During this payment hiatus your principal balance may increase.
For many borrowers this is acceptable, although this is something you will need to decide for yourself.
A minimum payment option loan is also called a cash flow ARM.
The basic principle behind this loan is that you are given a choice of the size of payment you make each month on your mortgage. This is in contrast to the standard mortgage bill, which offers you only one choice of payment.
The payment choices are usually a minimum payment, an interest only payment, a payment amount at the 30 year term level, and a payment amount at the 15 year term level.
The minimum payment option is lower than an interest only payment.
This loan type offers a borrower a much lower payment than a regular mortgage payment. This lower payment is sometimes over $1,000 less or more per month.
Any time you make a minimum payment you may have negative amortization on your loan. This is when your loan size increases.
The minimum payment option is usually available only for the first several years. This is often for the first 5 years of the loan term. After this term the loan becomes a regular loan.