This type of loan is a minimum payment option loan. This loan type of explained later in this article. With the 0.25% mortgage loan you have the option to make a very low payment. This type of loan usually requires a property that has at least 30% equity in it. For example, a property that is worth $400,000 with a loan of $280,000 has a loan to value ratio of 70% ($280,000/$400,000 = 70%). This property has enough equity to be considered for this type of loan. The minimum payment rate on this 0.25% mortgage loan is factored as an interest only loan at a 0.25% payment rate. A $200,000 mortgage would have 0.25% mortgage payment rate would be $41.67 per month for the initial minimum payment rate time (usually 5 years). A $300,000 mortgage would have 0.25% mortgage payment rate would be $62.50 per month for the initial minimum payment rate time (usually 5 years). A $400,000 mortgage would have 0.25% mortgage payment rate would be $83.33 per month for the initial minimum payment rate time (usually 5 years). A $500,000 mortgage would have 0.25% mortgage payment rate would be $104.17 per month for the initial minimum payment rate time (usually 5 years). A $600,000 mortgage would have 0.25% mortgage payment rate would be $125 per month for the initial minimum payment rate time (usually 5 years). A $700,000 mortgage would have 0.25% mortgage payment rate would be $145.83 per month for the initial minimum payment rate time (usually 5 years). The minimum payment option loan type offers a borrower the option to choose a monthly payment from several options. This choice is usually offered for the first 5 years of the mortgage loan, at which time the loan reverts to a normal loan. The loan options are usually a regular 30 year loan payment, an interest only payment, or a minimum payment. The minimum payment is usually far below the interest rate payment. This allows a person to make a "minimum payment". Any amount short of the interest only payment is added onto the principal of the loan and is known as "negative amortization". If an interest only payment is $1,000 and the minimum payment is $500, if you make a $500 payment then the difference ($500) is added onto the principal. This type of loan would have an APR of at least 7.5%, although this may vary depending on your specific loan scenario (30 year loan term, closing costs, etc.) |
