A payment option ARM is an adjustable rate mortgage whereby the borrower has the option of choose one of several payment plans.
These can include:
A home loan that is structured this way allows a borrower to adjust monthly repayment obligations base on his wage and salary.
A mortgage term refers to the period of time between the first disbursement of funds until the time the loan reaches maturity.
This is why the word is often used interchangeably with maturity. But they are not not always the same.
Lenders are specifically particular with the term as they use it to calculate monthly mortgage payments and amortization tables. And the longer a term becomes, the most interest they would make out of the deal.
When a scheduled payment is less than the interest due, the difference is added to the principal amount as deferred interest.
Deferred interest accrue and causes the principal loan balance to increase, the event is known as negative amortization.
These occurrences are common in interest-only ARMs.
Upfront mortgage brokers (UMB) are brokers who charges a broker’s fee plus wholesale loan prices for the services to match a borrower to the best mortgage the borrower qualifies for.
The main difference between UMBs and traditional mortgage brokerages is that they mention the total fees upfront so that the borrower can have the comfort that he will not be fleeced with hidden costs at closing.
While more details regarding fees will be disclosed at the customers’ request, this does not mean that they are cheaper than traditional brokers.