Option ARM Refinancing Loans

There are many products available that are included under the umbrella of refinancing loans; one of them is the Option ARM refinancing loan. ARM stands for adjustable rate mortgage and while it is a popular option, before you apply for one, there are a few things you should know.An option ARM refinance loan is possibly the most flexible type of loan on the market. With the option ARM refinance loan, you have four different options to control your loan payments each month.For instance there are two options that allow you to pay less than the principle and interest that are normal for all standard loans. Instead of paying both the interest and principle, you can choose to pay either the minimum payment or interest only. Minimum payment is the absolute minimum you can pay on your monthly loan payment. This type of payment is usually term interest deferred, because not only are you not paying the principle, you are also not paying some of the interest. The interest and principle are tacked on later on in the life of the loan according to the specific loan schedule. It should be noted that the minimum payment is usually increased every year to keep the homeowner somewhat in line with their necessary payments.An Interest only option allows the homeowner the option to pay only the interest on the loan deferring the principle. Interest only payments are a great way to increase cash flow, when employment is tight or if you would rather use your monthly income for other types of purchases or investments.Besides two options for paying less than the principle and interest of the loan, you also have two options for paying both your principle and interest. The first type of payment option is called the 30 year amortization payment. You pay your loan according to a standard loan in which you pay the principle and interest for a full 30 year mortgage term. The other type of option available is the full 15 year amortization payment. If you have extra income and would like to pay down your debt quickly, you can choose the option of paying off your loan in a 15 year schedule. It should be noted that this type of mortgage is not for everyone. For instance, seasonal employees might benefit from this type of mortgage especially during the slow season and savvy homeowners that manage their money well can also benefit. However, this type of loan is not for the person looking to pay the least amount possible due to a lower income. In situations like these, this loan can increase the risk of financial problems.