Adjustable Rate Mortgage (ARM) Options & Indexes

On this page you'll learn about:

• Option ARM
• ARM Indexes
• ARM Payment Options
• How doews ARM payment work

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.

ARM Indexes

• 12-MA 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.

ARM Payment Options

• Option #1 Minimum Payment The minimum payment gives you more money to work with each month. The First year's minimum payment calculates based on the initial start rate. The minimum payment for the year will be established annually.
• Option #2 Interest Only (No Deferred Interest) The Interest only option will 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 30 year Amortization (Pays Your Interest & Principal) The 30 year amortization 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 15 year Amortization (For Quick Equity) The 15 year amortization pays off the loan within the 15-year time frame, the 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.

How does ARM payment work

Every month, your lender will send you a monthly payment coupon offering you the four options mentioned above.

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