Cash Flow Adjustable Rate Mortgage


The Cash Flow Adjustable Rate Mortgage is also an option for consolidating debt. Like most interest-only options, this product is available to borrowers with above average credit scores. The Cash Flow Adjustable Rate Mortgage can be a powerful way to manage your money and allows you financial flexibility. As the name suggests, the Cash Flow Adjustable Rate Mortgage offers you options for paying your monthly mortgage and you choose the payment option that best fits with your monthly budget. The 4 monthly payment options are: minimum payment, interest-only payment, and fully amortized 15 and 30 year payments. Contact an Alerio Representative today to find out more about your Cash Flow Adjustable Rate Mortgage.

  • Minimum payment option : The preliminary interest rate for the minimum monthly payment option is 1.25%. This rate is good for the first 12 months of the loan. For the following 4 years, the payment cap is 7.5% of the previous year's payment. This means the payment will not exceed 7.5% of the previous year's payment. (For example, on a $100,000 loan, the first year's payment at 1.25% would be $333.25. The second year the maximum minimum payment would be $358.25. The third year payment cap is $385.11. The payment cap the fourth year would be $414.00, and the fifth would be $445.05). After the first five years, and every fifth year thereafter, the payment is "recast" or recalculated according to the current fully indexed rate. This payment is generally lower than the fully indexed payment, so if you are making this payment every month, it is possible to accrue deferred interest. If and when deferred interest reaches 110% of the original loan balance, the borrower will be required to make fully amortized payments. Deferred interest may be offset by appreciating property value or capital gains upon the sale of your home. Any amount paid in addition to the minimum payment will be applied to the principal portion of the loan. If you choose to make principal payments, the monthly minimum payment will adjust according to the remaining balance of the loan. This can be an excellent way to make substantial gains on your mortgage balance and pay it off much quicker.
  • Interest-only payment option : Another monthly payment option is an interest-only payment. The interest rate is calculated using one of three economic indexes (MTA, COFI, or LIBOR) and a margin, which will be fixed for the life of the loan. You will want to discuss the index to your loan with an Alerio representative. This payment option will fluctuate monthly according to the index attached to your loan. Any additional amount paid on top of the interest-only portion of the loan will be applied toward the principal portion of your loan. If making payments toward principal, the interest-only payment will read just accordingly the following month. Choosing to pay toward the principal balance of the loan will result in considerable gains in reducing your mortgage. There is no risk of deferred interest when making this monthly payment.
  • 30 year fully amortized : The 30 year payment is a fully amortized principal and interest payment. As with the interest-only payment option, the 30 year interest rate is based upon a combination of an economic index (with fluctuates monthly) and a fixed margin. The monthly payment may change monthly as a result of variation in the index. The 30 year payment will be a higher monthly payment than the minimum payment option or the interest-only monthly payment.
  • 15 year fully amortized : The 15 year, fully amortized payment includes principal and interest. The interest rate is comprised of a fixed margin and an economic index. In general, three indexes-the MTA, the COFI, and the LIBOR are used with this product. You will want to discuss which index is tied to your loan with your Alerio representative. The 15 year fully amortized option will have the highest monthly payment of the four payment options.

The Pay Option Arm is an excellent product because it allows flexibility in paying your monthly mortgage. Consolidating other debts with your Pay Option mortgage will further increase your monthly cash flow. It is a powerful money management tool with options that permit you to pay less money in interest and make sizable gains on the principal portion of your mortgage to pay it off quicker.