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Interest Only Payments

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October 2006

Interest-Only Mortgage Payments and Payment-Option ARMs - Are They for You?

This brochure on the Federal Reserve Board's website explains features of interest-only mortgage payments (I-O mortgage) and adjustable-rate mortgages with the option to make a minimum payment (a payment-option ARM). It includes cautions about payment shock, negative amortization, and prepayments. It also provides a glossary of key terms and a shopping worksheet to compare loan features and future rates and payments.

Whether you are buying a house or refinancing your mortgage, this information can help you decide if an I-O mortgage--or an ARM with the option to make a minimum payment (a payment-option ARM)--is right for you.