One Percent Mortgage

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Dave Zwierecki
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One Percent Mortgage
One Percent Mortgages are widely advertised as being able to dramatically reduce your monthly mortgage payment. The one percent mortgage and other mortgages which offer rates from Zero to 4% in todays market are what may commonly be referred to as Option ARM or Cash Flow mortgages, and are marketed under a variety of names. Their common feature is a minimum payment option which is equivalent to what the payment would be on a one percent mortgage. This minimum payment option is in fact an option to defer interest, which is a powerful feature designed for borrowers who understand that the interest that they defer today will have to be paid at some point in the future.

Borrowers typically have more control of their amortization schedule with interest only loans.

One percent mortgage loans are usually a teaser rate for the first few months of a loan. After the teaser period is over borrowers will need to make a regular monthly payment. The exception to this is whats called a pay option loan where lenders give you the ability to make a 1 percent minimum payment, interest only payment or regular amortizing payment.

When you receive a one percent mortgage understand that after the initial period your payment will increase by a large amount.

The One Percent Mortgage family and its relatives are excellent loans for people who understand how to take advantage of the ability to defer interest, but the one percent mortgage, two percent mortgage and every percent in between are highly sophisticated financial products and are not intended for borrowers who cannot benefit from negative amortization.

Borrowers who most frequently benefit from one percent mortgages and mortgages with start rates below one percent are those who derive most of their income from self employment, business ownership, passive income, long term capital gains, and bonuses. Hourly wage earners and borrowers with a fixed salary have also turned to one percent mortgages as a kind of insurance policy against temporary interruptions of income, especially when they lack the "rainy day" savings to withstand an unforeseen emergency situation which might disrupt their ability to pay their bills.

Whether the start rate on a one percent mortgage is one percent, two percent or any other percent in between, the minimum payment required during the initial period (normally 5 to 10 years) is about half of what a normal mortgage payment would be.

One percent mortgages may come with a variety of start rates. The lowest rate generally offered to the public is a one percent minimum payment, and the average rate offered is a minimum payment of between one percent and two percent. The lowest rate we offer is actually less than one percent, in fact it is just 0.25%, but this rate is available in select geographic areas only.

One Percent Mortgages and other minimum payment option loans are marketed under names such as Pick a Pay, Cash Flow, Pay Option, and Option ARM, as well as Smart Choice and Secure Advantage.

One Percent Mortgages and their like are characterized by having multiple payment options each month which allow the borrower to control the loan's amortization by choosing how much principal & interest to pay or not pay. The most common options are as follows:

1. Minimum Payment Option <= One Percent
2. Interest Only Pay Option
3. Fully Amortized 30 Year Option
4. Fully Amortized 15 Year Option

When a borrower elects to make the minimum payment on a One Percent Mortgage loan, they are not paying all of the interest due on the loan for that month. The difference between the one percent mortgage payment and the interest only payment on the same mortgage at the fully indexed rate is deferred, meaning that you don't have to pay it now! But when the home is sold, refinanced, or the loan recasts, the deferred interest will become payable.


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 Information listed above is to be used for educational purposes only and is not guaranteed

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