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1% Mortgage Refinancing

1% mortgages are widely advertised, and for many borrowers offer the opportunity to unlock their home equity on an ongoing basis by deferring interest in exchange for additional cash flow. 1% mortgages are commonly referred to as Option ARM mortgages, because they were originally adjustable rate mortgages which would go up or down in rate every month. However, borrowers can now take advantage of the flexibility of low 1% minimum payment rates and deferred interest without the perceived risk of a monthly adjustable rate mortgage. New mortgages, known as hybrids, offer fixed rates and payments for 3, 5, 7 10, even 30 years fixed, and have minimum payment rates as low as 0.25% ($288 per $100,000 borrowed). But is one of these mortgages a good choice for you? That depends:

If you are self employed or have an income that fluctuates from month to month or season to season, a 1% mortgage refinance loans may be a great fit for you.

Option ARMs have gotten a bad rap because many people were sold on them without understand how their payments could more than double in time. While not suitable for everyone, Option ARMs can make great sense for certain borrowers. Ask your mortgage consultant whether an Option ARM makes sense for you.

When getting an Option ARM, understand the difference between the 1% interest rate and the 1% payment. While the 1% interest is often for only the first month of the loan term, the 1% minimum payment can last for the first year. The difference between the interests accrued and the minimum payment is added to the loan balance, thereby creating a situation often referred to as "negative amortization" or "neg am".

One percent mortgage refinances can be a good way to free up a lot of cash and increase cash flow for a real estate investor. If a real estate investor was to refinance a couple of rental properties on a Pay Option ARM this could help increase cash flow for awhile, especially in a time where he/she might need more cash immediately. Pay Option ARM loans may also help if an investor had a couple of properties that they were trying to sell yet they were having a hard time due to the rough housing market right now and the houses were sitting vacant for an extended period of time. By refinancing a couple of the other rental properties to Pay Option ARM's this may free up enough cash so that you could comfortably afford the additional burden of the mortgages on the properties that were not selling.

Before utilizing one of these pay option loans you must be sure you completely understand this loan. If you have any doubts you should ask more questions until you are completely satisfied with your understanding of this loan program.


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Mortgage Broker | California Mortgage | The Loan Process Start to Finish | 100 Financing Low Credit Score | Refinancing when self-employed
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