New mortgage plan offered

Real Estate Weekly, August 9, 2000

Robert Withers, president of First Alternative Mortgage Corp. in New Rochelle and Kingston, N.Y., and Norwalk, Conn., announced that his firm is now offering the Option Arm Loan program. Designed for homeowners who want to manage their liabilities, this program enables borrowers to obtain a much larger home for lower monthly payments. Available only through select financial institutions, this program offers an initial interest rate of 3.95% with a payment that will not increase more than 7.5% per year, and it allows for deferred interest.

"Young professionals who want larger homes while they are still young, entrepreneurs whose incomes fluctuate greatly month to month, and commissioned salespeople who receive large bonuses are the people who can benefit greatly from this distinctive new loan program," said Withers. The Option Arm Loan program enables individuals and couples to purchase larger homes due to the flexibility of the program's terms and conditions. As interest rates 'creep upward' each day and the average price of a home increases dramatically, this program is growing in popularity among certain segments of the general US population.

Loan Options

Under the Option Arm Loan program, borrowers can choose from four monthly payment plan options:

* Low starting monthly minimum payment

* Interest only payment plan

* Fully amortizing principal and interest payments

* Lump sum prepayment of principal

"Under a traditional 30-year termed fixed mortgage," explains Withers, "a $250,000 mortgage at a fixed rate of 8% would equal $1,834 in monthly payments. That means the buyer could afford a $312,000 house with 20% down. With a 40-year term Option Arm Loan on a $250,000 mortgage, the buyer puts 20% down, without income verification, and can choose from four payment options."

Payment Options

Withers said that the payment options an Option Arm Loan applicant can choose from are:

* $1,037/month minimum payment

* Interest only payment /month of $1,562

* Principal and interest payment of $1,692 per month

* Any payment amount the buyer chooses (not less than the minimum payment indicated above)

"The beauty of this program is that a buyer could afford to purchase a $552,000 house and a $442,000 mortgage for the same $1,825 monthly fixed payment that he/she would have paid on the $250,000 mortgage explained earlier. Under the Option Arm program, they can purchase a larger home with 20% down, and pay the same fixed rate they would have on a smaller home," said Withers.