"Does a mortgage broker make more money with an option ARM than with a fixed-rate mortgage? I went to the broker looking for a 30-year fixed deal and allowed him to talk me into an option ARM -- with a three-year prepayment penalty that I didn't find out about until the closing. I have perfect credit and didn't need the lower payment; I have been making the fully amortizing payment every month. Did he steer me into that loan because he made more money on it?" In all likelihood, yes. The price of a 30-year fixed-rate mortgage is difficult to conceal; the borrower knows what the rate is and what it means. On an option ARM, the principal price is the margin, which most borrowers don't understand and which isn't a required disclosure. The margin is the number that is added to the rate index e...
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