Mortgage Quote
Get a free loan quote for purchase or refinancing.
Home Equity Loan Quotes
No cost quote for cash out and credit lines.
Home Equity Loan Information
Home Equity Loan Lenders
Mortgage Lenders
Find out what discounts our lending reps are offering today!
Mortgage Interest Rate Forecast
Mortgage Rate Index Options
Negative Amortization Loans
Deferred interest loans for purchase and refinance.
Payment Option ARM Loans
Mortgage Rates
Mortgage Refinance
Mortgage Refinance Information
Mortgage Refinance Lenders
Mortgage Refinance Loans
Refinance Quote
Get more info on better rate, fixed interest loan options.
Refinance Quotes
Refinance Home Equity Mortgage
Cash Out Mortgage Loans
Consolidation Mortgage Loans
Adjustable Rate Mortgage Loans
30 Year Fixed Rate Mortgage Loans
Interest Only Mortgage Loans
Jumbo Home Mortgage Loans
Self Employed Home Equity Loans
Pros and Cons of Interest Only Loans
Negative Amortization Home Purchase Loans
Second Mortgage Lenders
Second Mortgage Loans
Second Mortgage Rates
Second Mortgage Refinance

Negative Amortization Loans: Are these Mortgage Options Armed and Dangerous?

A conventional mortgage with a thirty-year period would be amortized over the thirty years. The monthly payment to the lender has two parts, one portion is a repayment of the principal of the loan, this is considered the amortization part of the payment, and the second portion of the payment is the interest on the loan. This type of amortization is not very risky.

Preferred Loan Type
Property Type
Property Value
Credit Rating
Email
 

Negative amortization mortgages could be considered very risky. In a negative amortization mortgage, the payments only have one part. The payment made to the lender covers only a portion of the interest earned. The balance of the interest earned is added to the mortgage balance, hence the term negative mortgage. The negative amortization is also called a "neg am" loan is a loan with an deferred interest loan that offers a low payment initially.

A danger is the loan balance exceeding the market value of the property. A secured loan may become unsecured and the ability to put a second mortgage behind negative ARM option loans may be questionable. If you aren't prepared for the deferred interest that could affect your home equity, then this loan is not for you. If you understand the risks, but need a low monthly payment to help you get in the right home, then this loan is for you. The difference between an interest only mortgage and a negative amortization mortgage is that in the interest only mortgage the payment covers all interest earned by the lender and the balance of the loan remains constant. The interest rate is so low that it is actually lower than the interest rates offered on an Interest Only Loan. Because this interest is so low, the interest is deferred and added on top of the principle balance of the loan.

The purpose of the negative amortization mortgage is to reduce the payments at the beginning of the loan. The loans may be either at a fixed rate or a variable rate. The fixed rate loan provides an even progression of the growth of the mortgage. With variable loans, the rate of growth will change from month to month depending on an increase or decrease in the index used to adjust the interest rate charged on the loan.

What are some of the indexes used with adjustable rate mortgages (ARM)? There is prime rate; this is what the banks charge their best customers. Many believe that the MTA-index and the COFI Option ARM are the best interest options offered today. Option ARM mortgages are becoming more popular as they are fully understood. The question is payments vs. lower interest rates. The lower payment option ARM increases the cash flow to pay off high interest credit lines or for debt consolidation.

Are option ARM mortgages any more risky then home equity loan mortgages, second mortgages, which can also produce negative amortization? First time buyers and those refinancing must carefully review all the options and decide what type of mortgage best fits there needs.


Mary is a web editor and writer who produces mortgage loan related articles for consumer. You can read more home loan articles at Mortgage Refinance Loan Outlet. If you would like more loan program information about home equity and loan refinancing, please visit Negative Amortizations Loans. For current rates and terms please visit Deferred Interest mortgage.

Freddie Mac's weekly survey of mortgage rates released Thursday showed that rates on 30-year, fixed rate mortgages averaged 4 percent for the week ending November 6th.

For most of 2011, rates on benchmark 30-year mortgages averaged 4.25% percent, second only to last year's 4.125 percent, the lowest annual rate in Freddie Mac's record keeping.

Take out a Home Improvement loan and make those cosmetic changes that you've been talking about. In most cases, making home improvements increases the value of your property. Home Improvement Loans!

"No Income Verified" Debt Relief Programs - Is your income difficult to prove? We have debt consolidation mortgage loans that do not require the standard income documentation. (like W2's)

Do you have Less-than-perfect credit? - We specialize in debt consolidation loans even if your credit is in "the rebuilding phase".

Bankruptcy or Foreclosure - Even if you've had a bankruptcy, or foreclosure in the past, we will do our best to get you qualified for a debt consolidation loan.

Mortgage Calculator
FAQ
Glossary
Company Profile
Contact Us
Loan Process
Mortgage Resources
Mortgage Directory
Mortgage Partnering
Home Loan Checklist
Mortgage Articles
Neg Am Loan Article
Pick a Payment Option ARM Article
This website cannot approve loans online & this is not an advertisement for credit defined by paragraph 226.24 of Regulation Z.
Copyright 2005 to 2013 and beyond, Mortgage Loan Outlet. All Rights Reserved.
Apply Now | Home | Disclaimers