Flexible Payment ARM

DEFINITION of 'Flexible Payment ARM'

A type of adjustable-rate mortgage that allows the borrower to select from four different payment options each month: a 30-year, fully amortizing payment; a 15-year, fully amortizing payment; an interest-only payment or a "minimum payment".

Flexible payment ARMs are also known as "payment option ARMs".

BREAKING DOWN 'Flexible Payment ARM'

Flexible payment ARMs are popular in high-cost 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
  1. Payment Option ARM

    A monthly adjusting adjustable-rate mortgage (ARM) which allows ...
  2. Payment Option ARM Minimum Payment

    An option to make minimum payments on an payment option ARM, ...
  3. Fully Amortizing Payment

    A periodic loan payment, part of which is principal and part ...
  4. Negative Amortization

    An increase in the principal balance of a loan caused by making ...
  5. Graduation Rate

    The percentage increase in the monthly payment on a graduated ...
  6. Deferred Interest

    The amount of interest that is added to the principal balance ...
Related Articles
  1. Personal Finance

    Option ARMs: American Dream Or Mortgage Nightmare?

    Option adjustable rate mortgages could make or break your home-buying experience.
  2. Personal Finance

    Choose Your Monthly Mortgage Payments

    Exotic mortgages allow you to decide how much to pay. Find out how much they really cost.
  3. Personal Finance

    Mortgage Amortization Strategies

    Should you get a 30-year mortgage? A 15-year one? Ways to decide which mortgage is the best fit.
  4. Investing

    This ARM Has Teeth

    Find out how to avoid getting bitten when your mortgage rate resets.
  5. Investing

    Payment Option ARMs: A Ticking Time Bomb?

    With these mortgages the loan's principal can continue to increase - even as payments are made.
  6. Personal Finance

    Mortgage Basics: The Amortization Schedule

    By Lisa SmithThe amortization schedule for a residential mortgage is a table that provides a breakdown of the schedule of payments from the loan's first required payment to the loan's final payment. ...
  7. Investing

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  8. Markets

    How Interest Rates Work On A Mortgage

    A step-by-step explanation of the interest calculations, mortgage types, and how the loan is eventually "retired" – which means paid off.
  9. Investing

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  10. Personal Finance

    ARMed And Dangerous

    In a climate of rising interest rates, having an adjustable-rate mortgage can be risky.
RELATED FAQS
  1. How should you choose the amortization period for your mortgage?

    Read about key considerations that homeowners should take into account before choosing the amortization period for their ... Read Answer >>
  2. What is the amortization schedule for my land contract?

    I need a schedule for a land contract. The loan is for $46,900. The payments are $400 a month with a 7% interest rate. How ... Read Answer >>
  3. What is the difference between a 2/28 and a 3/27 ARM?

    An adjustable rate mortgage (ARM) is a type of mortgage that has a fixed interest rate for a certain time period at the beginning ... Read Answer >>
  4. Is an adjustable rate mortgage (ARM) safe?

    Learn why an adjustable rate mortgage (ARM) can be a safe option as long as the borrower is familiar with the underlying ... Read Answer >>
  5. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
  6. Is there any time I would want to have a zero-principal mortgage?

    As a general rule, entering a zero principal mortgage, or what is commonly referred to as an "interest-only mortgage", is ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center