How a Miami Interest-Only Mortgage Works

MTA’s interest rates are based on the monthly treasuries average index; one of the most stable indexes in the market. By using this index, your payments won’t change much during the first five years. Payment rates usually range from 1% to 2.95% for the MTA.

Most MTA loans have a 5 year payment recast. A payment recast is a calculation that is done to come up with the necessary payment to repay the loan over the remaining 25 years. This is achieved by adding any deferred interest to the remaining loan balance.

For example , a MTA loan of $400,000 in which after 5 years there’s been $30,000 in deferred interest will have a new balance of $430,000 amortized over the remaining 25 years. So, if your payment started at 1% or $1,286, in year one and rates were at 6.75% or higher, after year five, your new payment would be $2,970, or higher.

When choosing a MTA loan, you have four choices for your monthly payments each month:

1. Minimum payment option – The minimum payment accepted by the bank. In most cases it will create deferred interests.

2. Interest only payment option – The payment is equal to the interest owed for that month. There isn’t a reduction of the balance of the home loan.

3. Full principle and interest – The same payment you would make in a 30 year fully amortized loan.

4. 15 year amortization payment option – The payment you’d make if you were going to pay off the loan in 15 years. This is the highest of all payments and the one that reduces the balance of the loan the fastest.