How to Pay Option ARM Loans

There are three types of payments that can be made within an option ARM loan. You can choose which type of payment to make each month. If you pay-off or refinance your option arm loan early, you may have to pay a penalty or fee.

Minimum Payment

When you need the lowest possible monthly payments, you can choose to pay a minimum each month. The minimum payment is less than the interest rate. Paying the minimum payment on your option arm loan will result in a higher overall balance on your loan.

Term Payments

When you are not concerned with lowering your monthly payments, you can choose to pay the interest rate and a portion of the principal each month. You will make these payments over an extended period of time, usually fifteen or thirty years.

Interest-Only Payments

When you need better cash flow now than you will require later, you can choose the option to pay only the interest on your ARM loan. If you expect a salary increase in the future, this will allow you to put off making bigger payments until your income increases.