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A minimum payment loan allows a borrower to make a payment that is less than a regular payment and also less than an interest-only payment.

The minimum payment rate can vary based on different loans. This example is about a loan with a minimum payment rate of 1%.

It is important to note that the minimum payment rate is different than the interest rate. The interest rate on these loans is usually a combination of a margin and an index. The margin is the bank's profit and the index is a third-party interest rate index, such as a LIBOR or CODI index.

Any time a minimum payment is made there can be negative amortization. Any mortgage payment amount short of the interest only payment is added onto the principal of the loan. In minimum payments are made the loan size actually increases. For many borrowers this doesn't matter because their equity increases faster than their loan size, or they simply prefer having a much lower monthly mortgage payment.

Here is an example:

Current loan balance: 350,000

Loan Term in years: 30

Index value: 3.50%

Loan margin: 3.00%

Fully amortizing interest rate 6.50% (this is index+margin)

Annual minimum payment size increase 7.50%

Loan

Minimum payment rate 1.00%

Monthly Payments 1,126

Annual Payments 13,509

Monthly Payments Loan

Monthly payments year 1 1,126

Monthly payments year 2 1,210

Monthly payments year 3 1,301

Monthly payments year 4 1,399

Monthly payments year 5 1,503

Annual payments Loan

Annual payments year 1 13,509

Annual payments year 2 14,522

Annual payments year 3 15,611

Annual payments year 4 16,782

Annual payments year 5 18,041

Total payments years 1-5 78,465

The minimum payment size is the same for the first twelve months. Each year the monthly payment size increases by 7.5% in this example. This is not an increase in the interest rate. It is an increase in the monthly minimum payment size.

The minimum payment option usually only lasts for the first five years of a loan.

Minimum payment option loans can have 40 year terms, which offers an even lower minimum monthly payment than 30 year loan terms.

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1) Do Your Homework and Shop Around for the Best House Refinance Rate.

Youre probably very familiar with the term shop around. This concept is particularly important when you are dealing with the largest investment you may ever make.your home. Remember, lenders are in a sense working for you, and they should be working to help you find the best home refinance mortgage rates that are available for your financial and credit situation. Even if you have bad credit, there are several Bad Credit Refinance Mortgage options that may be available to you.

When you start researching your house refinancing options, you may become inundated with information and lender offers to refinance your mortgage. Dont let that deter you from looking at your options, after all its better to have several options than no options at all. Shopping around can really help you find the best rates for your house refinance, so its definitely worth doing.

2) It May Be in Your Best Interest to Work with a Different Lender.

Even though you already have a lender for your existing mortgage loan, you should consider communicating with other lenders who offer Home Refinance solutions. The reason for this is that your existing lender may not be motivated to work hard to insure you have the best mortgage refinance rate since they already have your business. Also, if you let your existing lender know that you will also be considering other lenders, they may be more motivated to work on your behalf to keep your business.

3) Make Sure You Know the Difference Between a Good House Refinance Solution and a Lender Who is Only Out to Make a Good Profit.

If a mortgage refinance solution sounds too good to be true, it just might be. Make sure you take your time, and read the fine print before you commit to working with a lender on a mortgage contract. Always remember that many lenders make their commissions from mortgage fees. You may be presented with a great interest only refinance rate only to find that you would have exorbitant closing costs fees, some of which can be eliminated or significantly reduced. Compare interest rates and closing cost fee schedules to make sure you are getting a good mortgage solution for you, rather than just giving your lender a big pay day.

For Additional Resources on House Refinancing, Visit the Following Link.
http://www.i-mortgagenetwork.com/Refinance_Mortgage.htm

ABOUT THE AUTHOR:

T.Crowley provides resources that can help you find the best mortgage loan solution for YOUR needs. Visit her website: http://www.i-mortgagenetwork.com and receive a FREE, NO OBLIGATION Home Refinance quote at the following URL: http://www.i-mortgagenetwork.com/Refinance_Mortgage.htm