Option ARM Hybrid Loans

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In October 2005, the biggest evolution in mortgage products began, which has far surpassed the prior 10-years. Nearly everyone missed it! Hybrid 5/1, 7/1 and 10/1 ARM loans and even 30-year fixed mortgages now can have features where you can pay a minimum payment below the interest only payment. Option ARM Loans have become obsolete. Option ARM Hybrid Loans, also called Option ARM Secure Loans, are such well designed products that they have leapt far ahead of both Traditional 5-Year ARM loan and Option ARM Loans for many borrowers.

The Old-Fashioned Option ARM Loans were badly designed products for many reasons, with core features that are not beneficial:

You can only pay the minimum payment for about three years before the loan recasts, which means that the loan balance would be amortized over the remaining life of the loan. With the accrued interest, the loan balance would be between 110% and 125% of the original balance depending on the loan program. The borrower would be forced to pay the fully amortized monthly payment, which would be around 2 1/2 times larger than the low minimum payment the borrower had been enjoying.
The minimum payment is calculated as a fully amortized payment over 30 or 40-years at a start rate from 1% to 3.2%. After the 1st month and paying the minimum payment, no principal is paid. The low start rate, as low as 1%, used to calculate the fully 30-year (1.25% in the case of the 40-year loan) amortized payment is nearly equivalent to an interest only payment at a rate of 4% (or 2% for 40-year loan). The low 1% paytment rate blinds many consumers, because they equate it to an interest rate, when in fact it is merely a number to calculate the minimum payment.
Since borrowers generally "state" their incomes much higher than they actually earn, they cannot afford the amortized payment when the loan recasts after a few years.

Option ARM Hybrid / Option ARM Secure Loans, solve some of these problems.

Payment Options and Rate are fixed for 5, 7, 10 or 30-years. With the 30 year fixed option products, the payment will go up slightly over time if only the minimum payment is paid through the initial few years of the loan.
Option ARM Hybrid Minimum Payments are lower than Option ARM Loans, and the accruing interest rate is also lower (around 1% lower than Option ARM Loans) resulting in less negative amortization (i.e. less principal buildup). Some Option ARM Hybrid Loans allow you to build principle for a longer period of time and as high as 155% of the original balance, if you so desire.
With the 5/1 Hybrid products, the Minimum Payment can actually be made for nearly the full 5-year fixed period since the negative amortization portion of the payment is lower.
Choosing to have no prepayment penalty is not as costly

Lenders will lend up to 100% of the value of your home with a 660 FICO middle credit score with Fully Documented Income. These products can be used below 100% for fully documented files with credit scores as low as 620.

With the introduction of the Option ARM Hybrid Loans, Investors Lending Group is recommending these loans over the Option ARM Loans because they are better for the client in every way. We will still do the Option ARM Loans, if the client so desires.

There are several variations of the Option ARM Hybrid available on the market from many different lenders; we will help you pick the one that makes the most sense for your situation. Call us today, to tailor an Option ARM Loan to fit your needs and answer any questions that you may have.

For a private consultation,

(858) 764-4361 (San Diego, CA, USA)
(305) 677-2092 (Miami, FL, USA)