Option-ARM basics

Loan basics Key features of pay-option adjustable-rate mortgages:* Four monthly options: Fully amortized 15- and 30-year payments, interest-only payments and lower minimums that turned unpaid actual interest into principal.* A 7.5% annual hike in the minimum due, sending monthly payments more than 30% higher in the fifth year.* Actual interest rates that adjusted monthly and were based on one of a number of bank indexes.* Caps on how much time could pass and how high the loan balance could go before the full payment kicked in.Source: Times research