Question:

What is Power Option ARM mortgage?

Answer:

The Power Option ARM mortgage is just a fancy promoter's name of the Option ARMs. The Option ARM mortgage loans do have some attractive attributes that appease to the general public and calling them names as Power Option adds even more attractiveness.

How is Power Option ARM mortgage advertised?

Lenders make the point that the Option ARM mortgage allows for budget planning for the short and long run. There is great flexibility in managing tax deductions and more cash is free to invest in higher return instruments - bonds, retirement plans, etc.

However, if you are thinking of getting a Power Option ARM mortgage loan, you'd better ask about:

  • teaser rate period;
  • rate adjustment frequency and caps;
  • what increase of the loan balance triggers recalculation and transition to fully amortizing payments;
  • the ARM index and margin;
  • prepayment penalties and any acceleration clauses.

The Power Option ARM mortgage may be indeed a useful mortgage instrument but the hazards of creating a mess for the borrower are obvious.

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