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Arizona Mortgage Options continued Probably the most popular loan type in the Arizona mortgage refinancing industry is the interest only loan. One reason for this is the population is always increasing and property values typically are rising. This allows the homeowner to build equity through home appreciation, rather than principal reduction in loan finance. Interest only loans require the borrower to make a minimum payment that only covers interest. This loan type typically carries a duration of 2 to 10 years before the remaining balance is refinanced or becomes a variable rate amortizing loan. ARM loans are a short term solution which allows a borrower the benefit of a lower rate than they might have qualified for otherwise. These are typically 2-5 year teaser rates that become variable and most likely will increase after the ARM term expires. This loan type will allow for balance reduction as it is typically a principal and interest payment. This can be verified through the use of a loan calculator. The last loan type is easily the most aggressive of the four and the most complex. It is called the Option ARM and carries four different payment choices. It is also referred to as the “pick a payment” loan. The borrower has four options. The first payment option is based on a very low percentage of the balance amortized out over 30 years.(Usually between 1-2.5%). This means on a $300,000 balance, you can literally make a payment in the neighborhood of $1000. Unfortunately, the difference that would have covered the remaining interest on the payment is applied to the loan balance. This is basically a negatively amortizing payment. The second option is interest only. The third is a 15 year amortizing payment and the fourth a 30 year payment. This loan type works well for commission based employees who have fluctuating pay, or customers in an aggressive market that plan on a home appreciating at a rapid pace. If you are in the market for an Arizona refinance, keep in mind that you literally have hundreds of different loans to choose from and most of them are variations of these different loan types.
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