I was privileged to attend this class where I was introduced to the Equity option p lan. Basically, the Equity option plan is an adjustable rate mortgage that gives you 4 options monthly, and the current interest rate for the equity option plan mortgages is 2%. This basically gives you the privilege to build equity outside of your home. In that way, you can pay a very low monthly mortgage, and free up funds for other uses. Each month you can choose to pay the m inimum monthly mortgage or the interest only option or the normal 30-year or 15-year full principal and interest payment.
This i s one of the secrets that money makers will not tell you about. And they may not let you know whether you qualify for it unless you demand for it.
Let’s talk about this folks. If you have questions, please ask. If you have something to add to it, go ahead.
finidi, I don’t know why lenders won’t tell you about this loan program. It is not new. The name varies depending upon the lender and their marketing. I have seen it called an Option ARM, a Power ARM, and a Flex ARM. The index also varies from COFI to CMAT to CODI depending upon the lender.
I got my first option ARM from Washington Mutual in 1997, just got two more last year.
This program has lower than a 2% start rate. Shop around if you are going to take this risk look for the lowest start rate. However we are no longer in a declining market. http://www.moneycafe.com/library/mta.htm#chart this chart may make you sick.
Also read up on my other posts.
Consider the risk
the difference between 100000 at 2 percent (1 month adjustabe) and a 3/1 Interest only is $47.
Even though this program gives you a 30 year pay option, it’s not fixed! this entire loan changes every month and once you’re in it thier is a hefty 3 year pre-pay, less than a year from now that 2 percent rate is not going to be attractive anymore.
My Washington Mutual Option ARMS had a start rate of 1.65%and 1.47%. Both have only one year prepayment penalty periods. Both have a minimum payment, interest only payment, 30 year amortizing payment, and 15-year amortizing payment.
The pitfall with the minimum payment option is negative amortization accrues when the payment is less than the interest only option. At the end of five years the loan may be recast to amortize fully during the remaining loan term.