Home Loans
Are Minimum Payment Option Loans Fixed
(presented by www.refinance-refinance.net - mortgage lenders)
By Ben Afzal
Minimum Payment Option Basics
A minimum payment option loan offers the borrower an opportunity to make a small minimum monthly mortgage payment instead of the larger usual payment.
A typical 30 year fixed mortgage requires a borrower to pay both principal and interest. Slowly over the 30 year life of the loan the amount is paid off.
A minimum payment option loan works very differently.
This loan type allows a borrower to make a much smaller minimum payment each month, usually for the first 5 years of the loan.
The minimum payment amount is based on a minimum payment rate. This can be as low as 1%. This is not the same thing as the interest rate, which is usually much higher. The minimum payment rate is the rate at which a borrower can make payments. Any payment under the interest only level adds to their loan balance because of negative amortization. If an interest only mortgage payment is $1,000 per month and the minimum payment is $800 then if the borrower pays the minimum $800 level the $200 difference is added onto the loan amount.
Minimum Payments Fixed
One of the appeals of this type of loan is that is minimum payments are usually
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