Let's use the 401(k) as an example. Many homeowners cannot fully fund their 401(k)s because they are strapped with mortgage, car and child-care payments, and more. But because many employers match at least 50 percent on 401(k)s, these homeowners are essentially giving up "free money" by not contributing.

If a broker shows these borrowers how to use an option ARM to lower their monthly payment on a $400,000 home from $2,582 with a 6.5-percent fixed-rate loan to $1,286 with a pay-option ARM, for example, they have created cash flow.

What borrowers do with the cash flow is essential. Consider what happens if the borrowers take part of that cash flow -- say $500 a month -- and put it toward their 401(k). If their company matches the contribution by 50 percent, their monthly investment becomes $750 a month.

If they follow this formula for only three years and don't ever invest another dime, borrowers will accumulate $146,000 in their retirement account over 30 years, assuming a conservative 6-percent rate of return. That is regardless of whether they move or refinance after three years.

For the right borrowers, this is a better alternative to paying down their mortgage for two reasons. First, they maximize their tax benefit on the mortgage interest over an extended period. They also create liquidity that they might not have had if they chose to pay down their mortgage from the start.

If used wisely, the pay-option ARM can be an effective wealth-building tool. It should not be used to get borrowers into a house for a year until they can't afford it.

Instead, brokers should refer clients to a financial-services representative who can show them a way to invest their money to earn a decent return on it. Even if borrowers earn just a small return, it will be better than earning nothing with the traditional 30-year mortgage.

Pay-option ARMs can clearly be a beneficial tool for your borrowers. If you take the time to educate yourself and your borrowers about this product, they can also be a great benefit to you.

Scott Hastings is the director of marketing and distribution at CHL Direct. CHL Direct specializes in the option-ARM loan and offers Web-based training on a weekly basis. For more information, visit the company's Web site at www.chldirect.com. Reach Hastings at shastings@chldirect.com.

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