Explanation of the MTA-Index:

The 12-month MTA-Index (Month Treasury Average) is based on the average annual monthly yields of U.S. Treasury Securities, (T-Bill) adjusted to a constant maturity of one year, as made available by the Federal Reserve.  This Index is determined by adding together the monthly yields for the most recent 12 months and dividing by 12. Because itís an average, higher yields in some months are offset by lower yields in others. This Index has averaged below 5% over the past 14 years.

If you add the current monthly MTA-Index to a Margin and it will equal the current monthly "fully-Indexed" Rate; the Margin never changes.  Over the last
fourteen (14) years, with Mr. Greenspan continually increasing then decreasing the PRIME Lending Rate, the MTA-Index has averaged below 5%.  Therefore, if you're worried about the Life Cap (Index + Margin) going up to its max of 9.95% you need to understand how the MTA moves. E.g., if you had a 2.0% Margin, the MTA-Index would be capped at 7.95%, or 9.95% - 2.0% = 7.95%. Again, this Index has averaged below 5% over the past 14 years. This low average is one of the main reasons why none of our past Clients have ever needed to refinance off of this mortgage program.  Because when Fixed-Rates start to drop so does the MTA-Index.  Moreover, when the Fixed-Rates start to move higher, the MTA-Index moves slightly higher, and very slowly. 

 

The MTA-indexed Option ARM offers five monthly payment options. To make the decision that is best for you, you will need to understand the features and benefits of each option. The following is an illustration of your monthly loan statement and a brief description of the options that may appear.

Option 1 - Keeps payments manageable

The "Minimum" monthly payment option will give you more cash now and keep your monthly payments manageable. The  7.5% payment cap limits how much the Minimum payment option can increase or decrease each year. At times, the payment amount change allowed by the cap may not be enough to fully amortize the loan. Then a portion of the interest will be deferred, and added to the balance of your loan.

Option 2 - Pays all the interest

At those times when the Minimum monthly payment is not sufficient to pay the monthly interest due, you can avoid deferred interest by paying the Minimum monthly payment and any additional interest accrued during the month (same as interest-only payment). Your payments remain manageable, with no change in your principal balance for that month.

Option 3 - Pays principal too

This is the fully amortized or P.I. payment (Index + Margin.)  It is calculated each month based on the prior monthís interest rate, loan balance, and remaining loan term. When you choose this option, you pay all the interest due and reduce your principal, to pay off your loan on schedule.

Option 4 - Builds quick equity

For faster equity build-up, quicker payoff and substantial interest savings choose the largest monthly payment option. Option 4 is calculated to amortize your loan based on a 15-year term for the first payment due date.

Option 5 - Builds even quicker equity

For even faster equity build-up, and quicker payoff, or to lower your future monthly payments, you will always be allowed to pay any amount over the Minimum payment. Just add an extra payment anytime you like. All payment options will pay your house off in 30 years or less.