I hate seeing headlines like this because they are deceptive to the average consumer. I get calls from customers all the time asking about programs such as this.
These are mortgages known as "Payment Option" loans and usually have 4 payment options: a minimum payment (negative amortizing), an interest only payment, a 15 year amortized payment, and a 30 year amortized payment.
The interest only, and 15/30 year amortized payments should be self explanatory. Let's focus on the "minimum payment" option which gets us this super low payment.
The minimum payment rate is a very low rate such as 1.95% (to give you a payment of $1,468 on a loan amount of $400,000). What you need to know is that the "payment rate" is not the "interest rate". The interest rate (in this market) will always be higher, resulting in "negative amortization". This essentially means that every month that you make the minimum payment, your mortgage balance will increase.
Why would someone want to do this? I have done these for clients in certain situations such as:
- In a divorce situation, where both parties used to pay the mortgage, and the remaining spouse has to now pay the mortgage. In some cases, it is financially easier for them to use the equity to pay the difference every month.
- For someone with children in college (or multiple children in college) where the outlay of cash is significant for a few years, and they want some payment relief until the college payments are finished. This essentially uses the equity to fund the college, by allowing the mortgage balance to increase while paying the college bills.
- For someone in their retirement years, where they want to reduce their payments, but don't want to use a reverse mortgage.
I hope this answers this question. If you have any mortgage related questions, please feel free to contact me via email at anthony@anthonykirlew.com or 1-800-453-9290 (24 hour voice mail).
Happy Valentine's Day!
Anthony Kirlew
www.AnthonyKirlew.com
Need to sell your home? Visit: http://www.fsbotherapist.com/fsbohelp.html for more info.
No comments:
Post a Comment