Each month you will have 3 options on your mortgage bill:

1. 1.25% (first year) amortized
2. Interest Only
3. Fully Amortized

1. Starting Rate:

Starting Rate is the fully amortized rate that you pay during the first year on your loan. It is easier to grasp the concept once you see the numbers in the following example:

Let’s assume your loan amount is $100,000, then your mortgage payment for the first year will be $333.25/month. After the first year your payments will increase by 7.5%, so the second year your payments will be $358.24/month. The payments will increase by 7.5% until payments will reach Fully Amortized Rate. As soon as the payments are equal or bigger than payments of option 3, they disappear. If you wish you can refinance with 12 MAT again to get lower payments.

2. Interest Only

Interest only option gives you an opportunity to pay only interest rate and keep the current balance of the loan unchanged. The interest is based on two numbers:

+ 1. Current MAT Index (Adjusted monthly, please read "Additional Questions About 12MAT" to understand the index)
+ 2. Margin (Always Fixed)

Combined together this two numbers form the yearly interest rate that your loan is borrowed at.

3. Fully Amortized

Fully amortized payment option works essentially in the same way as 30 year fixed with the rate being MAT Index and Margin combined together. (Please see above for the rate explanation) This will be the fastest of the three options to pay off the loan if you desire to do so. Notice that the current rates are smaller than 30 Yr fixed rates.