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ChoicePay Loan Example

On a $500,000 loan amount. It compares a 5-Year Interest Only ARM payment based on a rate of 6.50% (as of 8/30/07) with the Minimum Payment Option, based on an initial payment rate of 1.00% (7.513% APR) with payment caps of 7.5% per year except after the 10th year and every 5th year thereafter. *See Important Disclosures for more details.

Minimum Payment Sample $1,608*

The Minimum Payment option is set for up to 12 months at a reduced payment rate.1 This option allows you to maximize your cash flow and may defer payment of interest on your mortgage loan – potentially allowing you greater flexibility in managing your tax deductions.2 However, because the Minimum Payment option does not typically cover the accrued interest that you owe, the unpaid interest is deferred and added to the principal balance of your loan. This is known as negative amortization which means your loan balance increases instead of decreasing.

Note that if the unpaid loan amount exceeds 115% of your original loan amount, the minimum payment will no longer be available and your payment will recast to a full principal and interest payment at the interest rate in effect at that time. Depending on the amount of negative amortization and the new interest rate, your payment could increase substantially.

Interest-Only Payment Sample $3,333*

The Interest-Only option allows you to take the money usually put toward the principal portion of your loan and use it for other expenses, such as reducing high-interest debts or investing. With the Interest-Only payment option, you are only paying the interest portion of the loan which means you are not paying down the principal balance on your loan.1 (This payment option is not available if it is less than the Minimum Payment amount.)

30 Yr Amortized Payment Sample $3,668*

To keep your loan on schedule, you can choose to pay off your loan based on a traditional 30-year schedule.1 The 30-year payment option allows you to pay both principal and interest due for that month. (This payment option is not available if it is less than the Minimum Payment amount.)

15Yr Amortized Payment Sample $4,778*

You can choose to make a principal and interest payment based on a 15-year payment schedule.1 This option allows you to make larger payments – when your cash flow permits – and pay down more of your loan. The 15-year amortized payment allows you to pay a larger portion of principal if selected each month. (This payment is not available after the 15th year of your loan and is also not available if it is less than the Minimum Payment amount.)

*This example illustrates payment terms for a 30-year adjustable-rate Cashflow 1-Year Payment Option Loan, based on a $625,000 home purchase with a 20% down payment, a $500,000 mortgage using an Interest Rate of 8.00%, and a Minimum Payment Rate of 1.00% for the first 12 months, in effect as of 8/30/07.

The Interest Rate may adjust monthly, based on the 1-month LIBOR index plus a Margin, set at 2.50% in this example. The 2.50% margin is available with a 1-Year prepayment penalty with a premium credit of 1.00% (subject to change). With a 5.50% LIBOR rate, this would make the fully indexed Rate 8.00% (8.013% APR). The payment examples listed here assume that the fully indexed rate, the Index plus the Margin, remains constant throughout the life of the loan; rates can change monthly during the life of the loan.

Rates used in this example are not guaranteed and are subject to change without notice. Using the assumptions above and assuming the fully indexed rate remains constant throughout the life of the loan, here are examples of the payment choices:The Minimum Payment for the first 12 months would be $1,608 based upon the 1.00% Minimum Payment Rate. The Minimum Payment could increase or decrease after the first 12 months or earlier. In the 10th year, and every 5th year thereafter, the Minimum Payment is recalculated using the current fully indexed rate without any payment cap.Otherwise, the Cashflow 1-year Payment Option Loan has annual payment adjustment caps after the 1st year.3 The Interest-Only Payment option is not available whenever it is less than the Minimum Payment. There is also the option of making amortizing payments based upon a 30- or 15-year term. For the 30-year term, such a payment would be $3,668 at the fully indexed rate. For the 15-year term, the payment would be $4,778 at the fully indexed rate. These options are not available if they are less than the Minimum Payment.

Deferred Interest (Negative Amortization): Payments will revert to fully amortizing over the remainder of the loan term if the outstanding loan amount reaches 115% of the initial loan amount due to deferred interest. In the example shown here, the outstanding loan amount would reach 115% of the initial loan amount in month 41 of the loan if the initial Minimum Payment amount was paid each month prior to month 41. In this case, a fully amortizing payment of $4,350 would be due in month 41.

Your ChoicePay Option Loan Statement Is Simple to Read and Understand


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