what are the pros/cons of using pay option ARMS for investing? short term and long term?

Real Estate investors are usually mostly concerned with cash flow and thus, keeping their payment as low as possible so the minimum payment that Pay-Option-Arms offer are great for that.
Of course, there are many variables that must be considered, some of them are financial market condition and performance since the interest rate and monthly payment will adjust monthly, monthly cash flow, the projected rate of appreciation...
If an investor buys a property to rehab and then flip it, the lowest payment is usually the best way to go.
Investors don't plan on keeping the loan for that loan so the negative amortization is usually not an issue for them.

To illustrate how these payments may differ, let's assume that you have taken out a $150,000 mortgage at 6% interest rate, and the lender offers an initial rate of 3%. Your options would look like this:

Minimum payment: $632.41

Interest only: $750.00

30-year amortization: $899.33

15-year amortized: $1,265.79


For investors and financially disciplined borrowers, this program allows great flexibility in monthly payments. It is a monthly custom made solution based on what their financial situation, disposable income, and priorities are each month.

The key is to fully understand how it works and understand what negative amortization and deferred interest really mean.

also don't forget to see what's happening on Wall Street with this product. it's taking a lot of fire from the Feds especially in this area. i can think of one lender that portfolioed these loans and they came under some heavy fire to the extent of their funding being halted and rate commitments not being honored.

Option Arms IMO [In My Opinion] is most beneficial for the savvy borrower or investor who is "aware" of what they are getting into. Anything that is opposite of that can be detrimental.IMO