What is a secured option ARM?


A secured Option ARM is a mortgage instrument that has the capacity to reduce the payment shock for borrowers, even though it is an Option ARM.

What happens, in fact, with a secure Option ARM is that after the initial teaser rate period of up to 3 months expires, the rate holds steady for limited time, much as a fixed rate mortgage, or a hybrid ARM. The secured Option ARM is in fact a Hybrid Option ARM. It has the minimum payment, but the borrower is saved the quick payment shock, as the rate will stay below the fully indexed rate for a longer time - 3, 5 or 7 years.

A Secured Option ARM will not Spare the Payment Shock

The secured Option ARM rate does have the capability to increase quickly after the fixed rate period expires and has the same dangers as an Option ARM - negative amortization is possible, and the rate can go up to the fully indexed rate pretty quickly if the index rate is rising in value.

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