How to compare interest only ARM mortgage vs ARM without an interest only payment option?


It is relatively easy to compare interest only ARM mortgage vs ARM without an interest only payment option.

Most Popular Features of Interest-Only ARM Mortgage Loan

The interest-only ARM home loan will allow the borrower to make only interest payments for 5 or 10 years. That is, if the borrower fully utilized the interest-only payment option at the end of the interest only period the borrower will owe as much as they initially borrowed. No loan amortization will have occurred.

Interest-only ARMs allow you to qualify for a bigger house and allow for fully amortizing payments, as well. There are also interest-only FRM loans.

Option ARMs are particularly useful mortgage loans, providing even greater payment flexibility to consumers.

Comparing ARMs with and without Interest Only Payment Option

Most IO loans are ARMs. Most ARMs with IO option are more expensive than normal ARM loans. After 5 or 10 years into the loan, the ARM mortgage with IO option will have a larger loan balance. The total interest cost (IC) of the ARM interest only loan is greater than the IC of a regular ARM without the IO option.

IO ARM loans will have higher interest rates - varying from .25% to over 1%.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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