There have been some recent changes regarding federal loan payment options. A guidance report was published on September 29, 2006 that spoke on the issue of mortgage payment options available to the public. The Federal Reserve, the Office of Comptroller of the Currency, the Federal Deposit Insurance Corp, the National Credit Union Administration, and the Office of Thrift Supervision all contributed to the the guidance report.
Each of the regulators mentioned above acknowledged that both, interest-only mortgages and the popular payment option (also called Pick and Pay) are legitimate forms of home financing. The popular payment option (Pick and Pay) allows the borrower to chose which level of monthly payments they wish to pay. This would normally give them the option to pay, Interest Only this option does not reduce the principal balance that is owed on the mortgage. This allows you to dodge the principal reduction by cutting the payments from the first three to ten years. At the end of that period the borrowers have the same balance they started with but then they have higher payments to reduce the debt over a shorter time frame. Then there is the fully-amortizing plan...
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