Mortgage Loan Outlet and participating lenders announce new "pick a payment" loans with options available with negative amortization, interest only or fixed rate mortgages. Applicants are excited because these new pay option ARMs give borrowers the ability to choose 3 payment options each month. This helps many borrowers with cash flow issues overcome the cumbersome obstacles that can be associated with million dollar home mortgages.
Fixed Rate, Interest Only or Negative Amortization Loans: Pick Your Payment
Walking into Starbucks the other day, I overheard a conversation between two ladies talking about these amazing loans that a realtor had suggested. I started to laugh, because I knew they were talking about my favorite loan. As you know I have been selling neg am loans before Billy Corgan left the Smashing Pumpkins. After easy dropping for another 2 minutes, I had to jump into the conversation, and throw my 2 cents about the negative amortization loans these ladies seem to believe was a fixed interest rate for 30 years. I let them know that sure there is a fixed rate option, but it certainly wasn't the negative amortization option. I explained to them about how the interest is deferred, but they were confident that I was crazy and they had a fixed rate for 30 years.
As I said in my last article, you do get a very low monthly, and most lenders offer 3 payment options each month. Borrowers choose from the fully indexed payment, the interest only or everyone's favorite the neg am payment. This loan is also being marketed cleverly as the "Pick a Payment Loan."
In Southern California, these loans have become very good friends with realtors who have found a good partner with these loans, because they assist in qualifying for a house that 5 years ago would have been considered out of the buyers price range. When underwriting these loans, lenders only calculate the initial payment for the neg-am payment. In many ways these payment option loans have helped increase million dollar home sales in California.
Of course skeptics suggest that in five years when these peoples' payment cap fade into the sunset that they will go into foreclosure. I have to wonder though, will you be living in this house in 5 years. Most young homeowners in southern California most likely will move at least once in the next five years. For those borrowers who cashed into new home with their earned equity made a good decision with the payment option ARM. This loan is not for the insecure borrower or your parents if they are on a fixed income. The pick a payment loan is for movers and shakers who are ready to take a risk to play in this real estate game. Can you earn more by investing the deferred interest? The key to any mortgage is research and personal application for your goals.