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MTA Index / MTA Mortgage

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50-Year Historical MTA Index Data Historical MTA index values. This is a great reference that includes links directly to the US treasury for current index.
MTA Mortgage Calculator This calculator will give you current MTA index and real-time loan quotes which you may apply for if you desire..

How Does an MTA Mortgage Work?

Every month, you can elect to make one of four different payment options. These options will arrive to you monthly in your mortgage statement. The four payment options are:

1. Minimum Payment One of the lowest mortgage Payments in the US. This can result in some Principal and Interest being deferred (Negative Amortization) during the first 5 Years. Any payment that is below the interest only payment, you will defer that interest and the amount will be added to the Mortgage. This minimum payment will increase by 7.5%. Regardless of where interest rates go, this payment will be available for the first 5-years of the loan.
2. Interest-Only Payment This will insure no negative amortization and still provide a low interest only payment. This payment is based off the fully indexed rate.
3. 30-Year Payment This payment is the 30-year, principal and interest payment. This payment is based off the fully indexed rate.
4. Pay 15-year payment This payment is the 15-year, principal and interest payment. This payment is based off the fully indexed rate.
For custom MTA mortgage figures visit the MTA calculator. It is a great help to understand the monthly payment options.

Why Pay the Minimum Payment?

The minimum payment can allow a borrower to increase their cash flow by reducing their mortgage payment. People use the cash flow savings to:

1. Debt Reduction - Use the extra savings to pay off more expensive debts that carry higher interest.
2. Investment- Apply the savings to an investment that will pay a higher rate than the mortgage.
3. Expedite the 2nd Mortgage Payoff- The borrower can pay off a higher rate second mortgage.

Some borrowers may never elect to pay the minimum payment. However, they have the peace of mind knowing that they can always afford the minimum payment.

Who is ideal for an MTA mortgage?

1. Fluctuating Income - People that have income that varies from month to month often prefer knowing that they can pay less when times are tough and more when business is better. Commission, Self-employed, seasonal and gratuity based positions are perfect for this loan.

2. Landlords- This loan carries great terms on Investment properties. If a renter does not pay or the property is vacant longer than expected, the minimum payment can help keep the cash flow loss to a minimum.

3. High Cost Housing- A 30-year mortgage is often times too expensive. This loan will allow a borrower to afford a much more expensive home while keeping the monthly payments low while still having a fixed and predictable payment for the first five years while the minimum payment is available.

4. Investors - Because of the ability to increase cash flow, this loan will naturally appeal to the savvy investor. If you can make a safe 10% investment from the cash flow savings on the MTA mortgage rate, you can clearly make money while taking advantage of the mortgage tax advantages.

5. Future Income - People that are going to increase their pay over the next 5 years and wish to live in a more expensive home now. These people can make the minimum payment until they get the raise or income that they are expecting in the future.

What are the disadvantages to the MTA Mortgage?

1. Adjustable - No matter how you slice it, this mortgage is adjustable. For people who do not intend on utilizing the MTA mortgage flexible loan options and intend on living in their home for 30 years, you may be better off in a 30-year fixed mortgage. Because 30-year fixed mortgages rates are so low right now, you may as well lock in the 30-year fixed rate instead of opt for an adjustable mortgage that will, over time, exceed the current 30-year mortgage rates.

2. Little or $0 Down Payment - The MTA mortgage does not allow for less than a 5% down payment. If you require 100% financing and wish for a low payment, you should consider 1, 3, 5 year interest only ARMS.

What are some alternatives to an MTA mortgage?

The MTA mortgage is an option ARM. The major option ARMs are: Cost of Savings Index, MTA Index, Cost of Funds Index, Certificate of Deposits Index.

Adjustable Rate Mortgage (ARM)
A mortgage with an interest rate and payment that changes periodically over the life of the loan
based on changes in a specified index.
To get real time MTA mortgage quotes and loan options please use the MTA mortgage calculator. This mortgage calculator will make this loan much easier to understand.

What is an Index?
An index is an independent, published economic indicator. The following indices are tied to a option arm: the 12-Month Treasury Average Index (12-MTA), the 11th District Cost of Funds Index (COFI), the 1-Year Constant Maturity Index (CMT) and the Cost of Savings Index. Lenders use indices to establish the interest rate for an adjustable rate mortgage. Additionally, ARM rates follow the movement of these indices. The lender adds a specified number of percentage points, called a margin, to the index to establish the actual ARM interest rate.

What is the 12-MTA?
The 12-Month Treasury Average Index (12-MTA) is based on average annual yields on U.S.
Treasury Securities adjusted to a constant maturity of one year, as made available by the Federal
Reserve. The 12-month average is determined by adding together the annual yields for the most
recently available 12 months and dividing by 12. Here is the historical data from the United State Treasury Department ( MTA Index )

Stability: The 12-MTA
The 12-MTA Index does not move up or down as rapidly as other market interest rates because
the 12-MTA is an average of annual yields on U.S. Treasury Securities over a 12-month period.
As a result:
· Higher yields are offset by lower yields on a monthly basis throughout the year
· It creates an index which is far less volatile than other pure-rate indices
· Interest rate increases take longer to affect the 12-MTA than other ARM indices
Historically, home loans tied to the 12-MTA have not exhibited sharp interest rate increases such
as those that occurred in the late 1980s.

MTA vs. Other Indices

The MTA is a very slow index. The index is nearly as stable as the world's most stable index, The Cost of Savings Index. However, MTA mortgages generally have better margins which are fixed through the lifetime of the mortgage. Because the MTA is an average annual yields on U.S.
Treasury Securities there is an inherent "lag" in the index which ultimately causes the index to move very slowly.

MTA Mortgage Calculator

This program will allow you to create a customized mortgage quote online. It will detail the various ways that you can structure the MTA loan as well as the monthly payment options. Click here for the MTA Mortgage Calculator.

MTA Product Guidelines

Advantages of ARMs:

  • Flexibility in the monthly payment: It is one of the main advantages of MTA ARMs. With MTA-indexed ARMs you will usually have a choice of payment options. Besides fully indexed and minimum payment options your MTA ARM will probably have an interest only payment option and you will be able to change payment options every month if you like.
  • Tax Planning: MTA ARMs may be used for tax planning. The borrower can defer interest payments and at the end of the year, analyze their tax situation. If it serves their tax interests, they can make a lump sum payment toward any interest that has been deferred and deduct it for tax purposes.
  • Easy qualifying: Many MTA lenders allow home buyers with good credit to apply without documenting their income, assets, or source of down payment. This is helpful for self-employed borrowers or those who have jobs where it is difficult to document their income.
    Low initial rate: Most MTA ARMs are offered with a very low initial rate. Some lenders will allow you to qualify for a larger loan due to this initially lower rate.


Why Consider an MTA ARM?:

  • The monthly payment is lower than with a conventional loan (Low Initial Rate).
  • It is a good mortgage for those with less than perfect credit or if your debt ratio is too high.
  • It is a good mortgage for those living pay check to pay check, or if you need to reduce your monthly payments.
  • Monthly savings can be invested and/or used to pay off credit cards.
  • It is a good mortgage if you have a need to accumulate more assets, or the need to fund investment accounts (higher return on your investments).
  • The MTA is a good fit for people who own their own business, have a fluctuating income, or live on commission.
  • It is popular with people who invest in real estate.
  • It is more insulated against market changes.
  • It has advantages for high-end home purchases (over $300,000 in value).
  • MTA is convertible to a fixed rate mortgage, and is assumable.
  • It is easy to qualify for.
  • It offers flexibility in your monthly payment - you will have a choice of payment options.
  • The MTA ARM provides more opportunities for financially savvy borrowers who seek more customized and ultimately less costly home-finance choices. This makes the MTA ARM a great financial tool for homeowners, especially those with fluctuating income.

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