Editors Note: Due to the mortgage and credit crunch, many loan programs have been eliminated. If you’re in need of a Denver mortgage contact us to discuss your mortgage options.

There are a wide variety of loan programs available.

One of the most popular loan options in the market today is the Pay Option adjustable rate mortgage, which is often called a flex or borrower’s choice loan. Available in 30 and 40 year amortized varieties, many of our customers who value having cash in their pockets each month have taken advantage of this innovative financing program.

For example, you have fixed rate mortgages, adjustable rate mortgages, VA mortgages, FHA loans, Reverse Mortgages, Interest-Only loans, Option Arm loans, Stated-income loans, No Ratio loans, HELOC’s, 30 year loans due in 15 years, etc. The list goes on and on. You should ask your mortgage professional which loans apply to your situation, whether you qualify, and what will save you the most money.

Adjustable (or Variable) Rate Mortgage (ARM) is a mortgage in which the Note rate can change throughout the life of the loan. The interest rate of an ARM is calculated by adding a predetermined margin to an interest market index. Some of the more common indices chosen as the underlying index are the 1-year Treasury Bill, London Interbank Offered Rate, and the 11th District Cost of Funds. Because the underlying index constantly changes to reflect market conditions, any ARM that base the their interest rates on that index would move in tandem.

Interest only options can be used on many of the other types of programs. It can be used on the fixed rate or adjustable rate programs. With the interest only option the borrower is paying only the interest and not the principle. There is usually a small fee charged to the interest rate for adding this option.

NINA loans are loans that don’t require income and assets to be disclosed or verified.

A HELOC is a home equity line-of-credit.

The traditional fixed rate mortgage is the most common type of loan programs, where monthly principal and interest payments never change during the life of the loan.

With a 15 year fixed loan, you will pay off your principle faster than with a 30 year fixed loan, even if you were only to stay in the loan for a few years.

The option arm loan is a loan that provides four payment options each month:-minimum payment-interest only-30 year amortization-15 year amortization This loan has a variable interest rate. However, the minimum payment is very low – much lower than the interest payment. The unpaid interest for each month is added to the total loan amount. This is referred to as “negative amortization”, because the amount you owe on the house will go up in time, not down. This loan can be good for short terms, such as for investors who will soon sell the property. It is also good for people whose income may change from month-to-month, and they need some flexibility.

An ARM loan is where the interest rate is fixed for a specified period of time and then adjusts according to the terms of the loan and the index associated with the loan.

Adjustable Rate Mortgages are excellent choices for our customers with growing families, as the often outgrow their houses much before the fixed period of the mortgage expires.

One of the biggest advantages of an ARM loan is that when interest rates fall, the borrower can take advantage of those lower rates without having to go to the expense of refinancing.

An arm loan typically starts out w/ a lower rate than a fixed rate loan and can give you several years of reduced payments compared to a higher fixed rate mortgage.

The most common ARMs are 6 month, 1 yr, 2 yr, 3 yr, 5 yr, 7 yr and 10 yr.

ARM loans offer way more flexibility than your standard fixed rate mortgage. With ARM loans you can do fixed terms of usually 1, 3, 5,7 or 10 years. Most of these programs also give you an interest only option to lower your payments even more. Even though it has some negative aspects, the Pay Option ARM ( aka Pick a Payment, Cash flow ARM, Neg Am) is my favorite loan. This ARM gives you 3 or 4 monthly payment choices. The interest rate does fluctuate every month, but the minimum payment adjusts once a year and is usually based on paying only 1% of the interest due. This is ideal for investment properties, first time homebuyers, or borrowers savvy enough to divert the savings into other investments. Make sure to discuss all of the options with your mortgage broker.

ARM loans are typically best for people who know that they will either refinance or move within a few years. Because rates tend to be lower on ARM loans, this can be a very good choice. However, if you have no intention of moving within the next few years, you may be better off to go with a fixed rate mortgage. This is something you will want to discuss with your broker.

One of the myths in the mortgage business is that ARM loans are for those who don’t qualify for a fixed rate mortgage. The fact of the matter is that most ARM borrowers could also qualify for a fixed rate loan but choose an ARM because of the lower payments and other advantages that the ARM product offers.

Random thoughts on when is the right time to refi:

This is a question that only you can answer. Many lenders will tell you that you ‘need’ to refinance if it is going to save you $50 or more per month. You have to ask yourself if the costs of doing the loan will outweigh the benefits that you will receive from the new loan. A good loan officer can help you determine this by finding out what the cost of the new loan will be, and what your new payment will be. From there, it is up to you to determine if it is really in your best interest.

There are some basic “no brainer” times to refinance. If your credit was less than perfect and your mortgage is an ARM with a short fixed period (2 or 3 years) you should plan to refinance just before you enter the adjustment period. Once you enter the adjustment period your rate could increase by as much as 2%. You should refinance to a fixed rate mortgage, you will most likely lower your payments or keep your payments and go to a shorter term such as 20 or 15 years

The right time to refinance really depends upon your current financial situation and what you need to do to get into a better financial situation. If you are looking to consolidate debt and bills into your mortgage, then you will need to wait until you have enough equity built up into your home to do this. If you simply want a lower rate and or term then you should consult your mortgage professional to see if the benefit of refinancing makes enough financial sense to you. Therefore, each unique situation requires it’s own personal analysis to see when the right time to refinance may be.

Many people refinance and use cash taken out to purchase investment properties. While this certainly isn’t for everyone, real estate investment can be very lucrative and can many times require very little cash out of pocket. If you are considering buying an investment property and would like to take cash out of your equity ask your mortgage professional how this can work for you.