DEFINITION of 'Flexible Payment ARM'
A type of adjustablerate mortgage that allows the borrower to select from four different payment options each month: a 30year, fully amortizing payment; a 15year, fully amortizing payment; an interestonly payment or a "minimum payment".
Flexible payment ARMs are also known as "payment option ARMs".
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BREAKING DOWN 'Flexible Payment ARM'
Flexible payment ARMs are popular in highcost areas during times of rising home prices. Borrowers who chose to make the minimum payment option care little about the amount that is added to their mortgage balances through negative amortization as it is easily eclipsed by the rising value of their homes. This is a risky strategy. A past history of rising home values should not be used to project future home values.
RELATED TERMS

Payment Option ARM
A monthly adjusting adjustablerate mortgage (ARM) which allows ... 
Payment Option ARM Minimum Payment
An option to make minimum payments on an payment option ARM, ... 
Fully Amortizing Payment
A periodic loan payment, part of which is principal and part ... 
Negative Amortization
An increase in the principal balance of a loan caused by making ... 
Graduation Rate
The percentage increase in the monthly payment on a graduated ... 
GrowingEquity Mortgage
A fixed rate mortgage on which the monthly payments increase ...
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