Secure option ARM

Secure option ARM

Secure option ARM is a real estate mortgage loan that's characterized by payment options and an initial fixed-rate period followed by an adjustable-rate period. For a specified period of time, the borrower has the option to make one of generally three payment amounts. Making the lowest amount results in negative amortization; making the middle amount pays only the monthly interest; and making the largest amount reduces the principal balance. Because the mortgage carries a fixed-rate initially, these payment levels remain stable unless the negative amortization limit is reached. At some point, the fixed-rate period will end, and the loan will convert to an adjustable rate.