The variable payment mortgage would be a mortgate on a fixed rate that allows you to vary your payment each month. The options would be as follows:<UL><LI>Principal + Interest -- Reduces the loan amount and re-calculates the interest payment (not loan lenght)</LI><LI>Interest -- Keeps the loan amount the same but pays the interest</LI><LI>Less than Interest -- Like a neg-am loan</LI><LI>Get money back -- Like a reverse mortgage</LI></UL>
The idea of this sort of loan would allow the borrower to make what ever payments they can afford in a given month. Say in one month they get a bonus from work they can pay in (most loans allow this now) but it would reduce their future payments (not loan lenght). Or say, they loose their job and can't make a payment they can actually draw on the loan like a home equity line. This would all be done on a single loan. The advantage to the lender would be that the customer would be more "sticky" and less likely to refinance to another program to pull money out.
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If I am not mistaken this is very similar to a version of the interest-only loan.
gtotev,
This is not the typical interest only loan. It allows the borrower maximum flexibility in determining how much the payment would be each month. Say the intererst only payment is $1000. The borrower could choose to pay $1000 or $1500 to reduce principal, $800 which would be a neg-am or -$500 if they need to borrow against their home (home equity).
-Voltmer