An issue for many homeowners is in managing your monthly income and expenses, generally referred to as "cash flow". Income can vary on a monthly basis for many reasons and unplanned expenses of many kinds can come up when we least expect it. For many of us, our mortgage payment  is our largest monthly expense, but it is also the least flexible. The Cash Flow ARM was designed to give you greater control over your mortgage payment. You have the option of choosing one of four payment options each month based on your specific cash flow needs at the time.

Minimum Payment - A payment that is set for 12 or  60 months at a greatly reduced rate. The minimum payment rate for the 12 month option is currently at 1.25% (yes, 1.25%!) and the 60 month option is at 1.25%. This option not only maximizes cash flow but may also defer payment of interest on your mortgage allowing greater flexibility in managing your tax deductions. Plus, this minimum payment can not increase by more than 7.5% each year except when your loan is recast every five years or when your balance exceeds 110% of your initial loan amount.

Interest Only Payment - Defer paying principal on your loan and improve your monthly cash flow. The money you save improves your cash flow. This option is not available if the interest only payment would be less than the minimum payment.

Fully Amortizing Payment Options - You have the ability to make a principal and interest payment based on either a 30 year or 15 year payment schedule. I have included a Cash Flow ARM statement as well.

    The Cash Flow ARM series allows you to choose your index based on your own needs. You can chose from the 1 month LIBOR (London Interbank Offered Rate) or the MTA (12 Month Treasury Average).

Here is a 10 year average comparison between a 30 year fixed and fully indexed LIBOR, MTA, COFI, and the 1 year Treasury Index.

Fixed         7.710%
T Bill         7.708% average of 4.833 with a 2.875% margin
COFI         7.490% average of 4.590 with a 2.9% margin
MTA          7.442% average of 4.942 with a 2.5% margin
LIBOR       7.102% average of 4.852 with a 2.25% margin

Additional Options  -  If you are looking for the additional security of a fixed payment while still taking advantage of the extremely low Cash Flow ARM interest rates, there is also a 5 year fixed payment option. With the Cash Flow ARM 5 year Fixed Payment Mortgage, you are guaranteed a fixed minimum payment for the first five years. You still have the four payment options to select from monthly to manage your cash flow. And, with each of these loans, you also have the ability to increase the term of your loan from 30 to 40 years lowering your payment even further.

The Minimum Payment Advantage  -  The example below is based on a $400,000 mortgage.  It compares a traditional 30 year fixed rate payment based on the above 10 year average to the minimum payment available on the Cash Flow ARM again based on the 10 year average. Assumes that the Minimum Payment increases by the maximum 7.5% per year.

 

Savings over 3 years        $39,450
Savings invested at 8%    $44,704

        New! I have developed a Word document that goes into detail on how this new program works. Send me a quick requesting a copy of "Understanding the Cash Flow ARM".  I will send it by return email.