Flex-Pay Plan

Manage Your Cash Flow

Having up to four payment options allows you to manage your cash flow and overall financial picture on a monthly basis. If rates increase, you can pay the minimum amount (Option 1), in which case some of your interest would be deferred. Deferred interest, also know as negative amortization, occurs when the monthly payment is not sufficient to cover the interest accrued during the prior month. The unpaid interest is added to the balance of the loan, rather than increasing the current monthly payment. You can avoid deferred interest and take advantage of the maximum tax benefit in the current year by paying Option 2 or 3. Rate decreases may result in accelerated amortization, reducing principal or any unpaid interest more rapidly.

Increase Flexibility

After considering your monthly financial objectives, choose the available option that best suits your needs. Just enter the amount of the option selected in the payment coupon section of the loan statement. In addition to the four payment options, your monthly statement will show, if applicable, the total amount of unpaid deferred interest on your loan. You may pay all or part of this deferred interest at any time.

HOW DOES IT WORK?

Each month you will receive a loan statement giving you Four Payment Options to choose from. Minimum Payment, Interest Only Payment, 30-Year Full Principal and Interest Payment or a 15-Year Full Principal and Interest Payment.

Option 1: Minimum Payment
·          This option gives you more cash now and keeps your monthly payments manageable. The payment changes annually and is calculated using the initial interest rate for the first 12 months (current initial interest rates can vary from 1% to 3 ½% depending on the type of loan).
·          The minimum monthly payment is usually recalculated annually thereafter; and is based on the outstanding principal balance, remaining loan term and prevailing interest rate
·          7.5% Payment Change Cap limits how much this option payment can increase or decrease each year (example: an initial minimum payment of $1,000 during the first year would increase to $1,075 or decrease to $925 in the second year)

Option 2: Interest Only Payment

At those times when the minimum monthly payment is not sufficient to pay the monthly interest due, you can avoid deferred interest by paying the minimum monthly payment plus any additional interest accrued during the month.
· Payments remain manageable, with no change in your principal balance for that month (Option 2 will not be offered if the interest only payment is less than the minimum payment due.)

Option 3: 30 Year Full Principal and Interest Payment

This is the fully amortized payment based on a 30 year loan.
· Calculated each month based on the prior month’s interest rate, loan balance and remaining term
· Pays all of the interest due and reduces your principal, to pay off your loan on schedule (Option 3 will not be offered if the full principal and interest payment is less than the minimum payment due.)

Option 4: 15-Year Full Principal and Interest Payment

For faster equity build-up, quicker payoff and substantial interest savings, choose the largest monthly payment option.
· Calculated to amortize your loan based on a 15-year term from the first payment due date (Option 4 will be offered only on the 30- or 40year term and cease to be an option when the loan has been paid down to its 16^th year.)