What a great title. It's eye-catching. Here's a little more detail. You get four payment options with this ARM. Unlike other Hybrid ARMs, this low introductory interest rate can last for as little as three months, after which the rate typically jumps above 4%. Still, this is less than most fixed-rate mortgages. The objection many people have about these loans is that the rate adjusts frequently, as the Feds adjust the short-term interest rate.

As home values increase, this type of loan offers you a creative way to increase your buying power. From day one, you have more flexibility. The four payment options are:

• Fully amortized, like a 30- or 40-year fixed mortage: Make this payment each month and your loan will be paid off in 30 or 40 years.
• Amortized over a 15 year period: Make this payment each month and your loan will be paid off in 15 years.
• Interest-only payment, based on the 30- or 40-year amortization: Your loan balance will be the same in 30 or 40 years as it is today if you choose this option.
• Minimum payment, the negative amortization option. In this case, although your payment is based on an artificial rate (say 1.95%) the difference between the real rate and the artificial rate is tacked on to your loan amount. This means the amount you borrowed is going up rather than down.

Why would you choose to make interest-only or minimum payments? If you knew you were selling in 5 years or less, or you are banking on home values appreciating. You may be playing the cash-flow game that landlords play, too. Income less out-go equals profit.

• Explore other Loan Types
• Compare a fixed mortgage to an ARM
• Find Out About the 8 Deadly Home Buying Mistakes
• Learn about Credit Scores
• Determine if you want to be pre-qualified or pre-approved
• Learn about the Tax Advantages of Home Ownership
• Submit A Loan Application