Lower Mortgages
Homeowners are given a choice of which rate to pay, which is why negative amortization loans are also referred to as “payment option” loans and option ARMs. Cost of Funds Index (COFI), Cost of Savings Index (COSI), and Monthly Treasury Average (MTA or MAT) are all examples of Alt-A negative amortization loans.
Because of the flexibility these loans offer, not to mention affordability for a home purchase loan or if you want to cash out on your home equity with a mortgage refinance.
Do 1.25% interest rates really exist? NEG am mortgages calculate several mortgage rates. One is called the payment rate the other is the actual interest rate. Fortunately, the payment rate is capped at 7.5% of the previous payment. When the interest rate resets to a higher rate with a negative amortization Adjustable Rate Mortgage (ARM), the mortgage payment doesn’t change. Instead, the additional interest expense is added to the loan balance.
Negative amortization and interest-only loans can be useful if you are primarily concerned with cash flow instead of building equity. If you only pay the payment rate, the overall monthly mortgage payment might be lower than a typical 30-year, amortization loan. If you’re a short-term borrower who plans to refinance or sell the home within a period of a few years or if you have unsteady sources of income or too little documented income to qualify for a traditional loan, you may want to consider a NEG am loan or an interest only home loan.
With an interest-only loan, you pay only the interest on the mortgage in monthly payments for a fixed term. Like NEG am loans, interest-only loans are option ARMs because borrowers have the option of paying only the interest or paying principal and interest.
Tags: 1.25% start rate, credit lines, home equity loans, interest only loans, mortgage rates, mortgage refinance, Negative amortization loans, payment option arm, pick a payment loans, second mortgage
August 4th, 2010 at 9:53 am
Fantastic blog! I really love how it’s quick on my eyes and the details is well written. I am wondering how I might be notified whenever a new post has been made. I have subscribed to your rss feed which need to do the trick! Have a nice day!