Your Guide to Credit and Personal Finance

Interest only mortgages seem to be the rage these days, and with good reason… they offer a good program for mortgage and cashflow flexibility. However, there’s another program that’s gaining in popularity, and it features an interest only option as one of its components. But, it expands the borrower’s choices even more… thereby providing yet greater control and flexibility for managing your single, largest investment. The “12 MAT” (12 MTA) or “Pick A Payment” mortgage gives the borrower four different payment choices every month.

One choice is what’s referred to as the “start rate” which can be as low as 1%. Another choice is an interest only payment. And, the two remaining choices provide the borrower with making payments based on 30- and 15-year amortization schedules… for paying down principle and building equity faster.

Now, before you go jumping off the “interest only” option bandwagon, and on to the “12 MAT” express. Be aware there is at least one important distinction to be made between these two programs… the 12 MAT requires better credit. You can get approved for a 12 MAT mortgage with a midscore FICO as low as 620. Whereas, to be eligible for the widest selection of lenders offering “zero down, interest only” mortgages, you only need a midscore FICO of 580.

The 12 MAT, Pick-A-Payment mortgage is actually an “option arm”. 12 MAT and Pick-A-Payment are simply popular names with which this program has become associated. The “MAT” is just a letter rearrangement of “MTA” (Monthly Treasury Average) which is one of several indices an option arm can be tied to for its periodic rate adjustment. The other indices are the COFI (Cost of Funds Index), COSI (Cost of Savings Index), the CODI (Cost of Deposits Index), and the LIBOR (London InterBank Overnight Rate). Of these indices, historically, the COSI has been the most stable index, while the LIBOR has been the most volatile.

For more on 12 MAT, pick-a-payment mortgages see…
New 12 MAT LTVs and FICOs.
Now there’s a zero down 12 MAT.
12 MAT mortgages… often misunderstood.
Libor vs. MTA vs. COSI and more… common indices for 12 MATs.
The 12 MAT… for mortgages with more control.
The 12 MAT in depth.
Refinancing with the 12 MAT.