New Interest Only ARM Program Option
Carrington Mortgage Services, LLC (CMS) is pleased to announce effective Monday, July 15, 2019, the Carrington Advantage (Flexible Advantage/Advantage Plus and Investor Advantage) programs will offer a new Interest-only product option. Interest-Only loans offer borrowers lower monthly payments by allowing borrowers to pay only the interest during the 10 year interest-only period. Once the interest-only period ends, borrowers must begin making principal payments to pay off the debt.
The new Interest-only product has the following features:
- Terms Available: 5/1 ARM-IO, 7/1 ARM-IO, and 10/1 ARM-IO
- Doc Types: Full Doc, 1-Year Alt Doc, 12 or 24 Month Bank Statements
- 5/1 Caps = 2/2/5 (Initial cap at 2%; Interim cap at 2%; Life cap at 5%)
- 7/1 and 10/1 Caps = 5/2/5 (Initial cap at 5%; Interim cap at 2%; Life cap at 5%)
- Margin = 3.50% (Flexible Advantage Plus), 5.00% (Flexible Advantage)
and 6.00% (Investor Advantage)
- Floor = Start Rate
- Index = 1 Year LIBOR
Interest-only Qualifying Payment
Interest-only loans qualify using the fully amortized payment calculated over the fully amortizing period, based on the greater of the note rate or the fully indexed rate to determine qualifying PITIA. For example, a 30-year loan with a 10-year interest-only period would have a 20-year fully amortizing period (see guidelines for details).
- Loan Amount: $400,000
- Interest Rate: 5.75%, Full Indexed Rate 6.75%
- 5/1 IO ARM
- Principal and Interest to Qualify borrower = $3,041.46 (Fully Indexed Rate over 20 Year Amortization)
- Loan Amount: $250,000
- Interest Rate: 7.25%, Fully Indexed Rate 6.75%
- 7/1 IO ARM
- Principal and Interest to Qualify borrower = $1,975.94 (Interest Rate over 20 Year Amortization)
View the Guidelines here.
Please Note: All Interest-only Terms are amortized over 20 years for qualification and have an Interest-only period of 10 years regardless of the fixed period of the ARM.