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Option-ARM basics

March 20, 2010

Loan basics

Key features of pay-

option adjustable-rate

mortgages:

* Four monthly options: Fully amortized 15- and 30-year payments, interest-only payments and lower minimums that turned unpaid actual interest into principal.

* A 7.5% annual hike in the minimum due, sending monthly payments more than 30% higher in the fifth year.

* Actual interest rates that adjusted monthly and were based on one of a number of bank indexes.

* Caps on how much time could pass and how high the loan balance could go before the full payment kicked in.

Source: Times research

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