As many options of a New York mortgage that there are, it always ends up being a love/ hate relationship when it comes to picking between the Payment Option ARM or Pick a Pay mortgage. This is actually the case in other states as well, and has become one of the most popular home loans in the USA, and is definitely the fastest growing option in high cost states like California, New York, New Jersey and Connecticut. While many people love the 1% start interest rates especially such ones like New Jersey interest rates, or California interest rates, but there are a lot of people who don't feel comfortable with the possibility of payments increasing in as little as 1 month on many of the most common mortgage programs. The common wisdom is that the Option ARM can be an incredible product for savvy homeowners and investors, but may be too powerful for the average homeowner to handle.

 

For this reason, many Connecticut and New York mortgage brokers have come up with an innovative class of new loans that has been recently introduced for homeowners who want the security of a Fixed Rate mortgage, with the flexibility and exceptionally low payments of an Option ARM. These home loans go by many names, including Hybrid Option & Fixed Option ARMs.  Although they have different names, they have one thing in common; a fixed payment for several years.  Some people get confused and consider it to be the same as a normal everyday mortgage. Some of these mortgages have fixed interest rates, some of them have fixed minimum payments which don't go up, and some of them have both.

 

            There are other key benefits to getting the hybrid Adjustable rate mortgage.  For one, they have a fixed minimum payment for 1, 3, 5 or 7 years before they begin the adjustments. Some can even have a fixed interest rate for the full term of the home loan in many programs.  Minimum payment in a hybrid ARM is typically 55% lower than a regular home loan.  There is also an increased cash flow, which means a decreased risk that makes housing affordable & secure.  Many option ARM loans have the interest only payment option that continues even after recast. Because fixed mortgages can be initially expensive looking, the hybrid ARM greatly reduces the sticker shock of a fixed mortgage.  Likewise, it reduces the shock of payments on an adjustable rate mortgage.

Finally, the hybrid ARM retains flexibility of an option ARM. 

 

Like an option ARM, the borrower has options when it comes to the payment options in a hybrid adjustable rate mortgage.  The borrower can choose to make the minimum payment, which is decided at the time of the home loan signing.  They can choose to do the interest only payment, which means they are only required to pay off the interest on a loan.  Anything paid off after that is taken off of the principal.  If this option is chosen, they should be careful because if they pay less than is suggested, more interest will accrue, and they will end up paying more on the loan in the long run.  There is also the option of the 15 year amortized payment, or the 30-40 year amortized payment option.