Benefit

The benefit of this loan is that it allows you to make a minimum payment each month, often even below the interest-only level. This type of loan option can dramatically reduce your monthly payments.

How It Works

The minimum payment option loan allows you to make a choice each month about the amount of mortgage you want to pay (that is why there is an "option" on your monthly payment).

The payment options typically are:

minimum payment

interest-only

30 year fixed

15 year fixed

Each payment option increases the size of your monthly payment.

You can typically make minimum payments for the first five years of the loan. If you pay the minimum payment the difference between the minimum payment and the interest only payment is added onto the principal of the loan.

Example

Here's some quick tips on how this works:

Current loan balance

350,000

Term

30

Index value

3.50%

Loan margin

3.00%

Fully amortizing rate

6.50%

Annual minimum payment size increase

7.50%

Loan 1

Minimum payment rate

1.00%

Monthly Payments

1,126

Annual Payments

13,509

Monthly Payments

Loan 1

Monthly payments year 1

1,126

Monthly payments year 2

1,210

Monthly payments year 3

1,301

Monthly payments year 4

1,399

Monthly payments year 5

1,503

Annual payments

Loan 1

Annual payments year 1

13,509

Annual payments year 2

14,522

Annual payments year 3

15,611

Annual payments year 4

16,782

Annual payments year 5

18,041

Total payments years 1-5

78,465

To figure out your payments, use our website's mortgage calculators.