Option Arm Mortgage Loans: How do they work?

Typically, option arm mortgage loans give the consumer four payment options each month - a 30year fixed payment, a 15 year fixed payment, an interest only payment and a deferred interest or minimum payment.

The 30 year, 15 year and interest only payments are based on the fully indexed rate. The fully indexed rate is calculated by adding the margin to the index. The index would most likely be the Libor, MTA, COSI, COFI, or CODI.

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