Cash flow ARM
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A cash flow ARM is a minimum payment option mortgage loan.
This is a fancy term for a loan that allows a borrower to choose their monthly payment from several options.
These payment options usually include the option to pay at the 30 year level, 15 year level, interest only level, and a minimum payment level.
The minimum payment level is usually lower than the interest only payment.
This type of loan can result in negative amortization.
The option to make a minimum payment is usually available only for the first several years of the loan.
Cash Flow ARM mortgages are synonymous with Option ARM mortgages, however it should be noted that not all loans with Cash Flow Options are adjustable. In fact, Fixed Rate Cash Flow option loans retain the same cash flow options as Cash Flow ARMs and Option ARMs, but remain fixed for up to 30 years.[1]
[edit] References
- ^ Hunt, Tristan. Fixed Rate Loans for the Rest of Us. Retrieved on 2007-03-15.
