Option Adjustable-Rate Mortgage - Option ARM

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Dictionary Says

Definition of 'Option Adjustable-Rate Mortgage - Option ARM'

A type of mortgage where the mortgagor (borrower) has several options as to which type of payment is made to the mortgagee (lender). In addition to having the choice of making payments of interest and principal that amounts to those made in conventional mortgages, option ARMs also have alternative payment options where the mortgagor can make significantly smaller payments by making interest-only payments or minimum payments.
Investopedia Says

Investopedia explains 'Option Adjustable-Rate Mortgage - Option ARM'

Since many option ARMs offer a low teaser rate, many mortgagors unknowingly refinance their present mortgage in hopes of making lower payments. Unfortunately, once these short-term teaser rates expire, the rates of interest are returned back to those similar to conventional mortgages.

Furthermore, for those unlucky mortgagors that elected to make minimum payments, they will find that the principal owed on their mortgage has actually increased. This is because the value of minimum payments did not entirely cover the mortgage's interest. The uncovered interest would then be added to the mortgage's principal.
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'Option Adjustable-Rate Mortgage (Option ARM)'

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  • This ARM Has Teeth

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    ... ARMs, see Mortgages: Fixed-Rate Versus Adjustable-Rate, American Dream ... with a
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  • Choose Your Monthly Mortgage Payments

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    ... Adjustable-rate negative amortization mortgages are generally called payment option
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  • Mortgage Options For Underwater Homeowners

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    ... or taking on an option adjustable rate mortgage) and refinancing ... However, weigh this
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  • Make A Risk-Based Mortgage Decision

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    ... of payment shock and a mortgage's effect on ... shock is generally associated with
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  • Financing Basics For First-Time Homebuyers

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    ... Read on to find out which financing option may be right for you. ... such as an
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  • Reduce Interest With An All-In-One Mortgage

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    ... The adjustable rate for this type of loan could be 1% higher than ... This is because
    this type of mortgage will only benefit a borrower who ... 1 Year ARM, 3.54%, 3.53%. ...

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  • The Reverse Mortgage: A Retirement Tool

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    ... Borrowers have the option to select an interest rate that can change every year
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