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| *Business questions>>>Renting & Real Estate Questions |
Is this a bad loan that is trouble or a good one? Here are the details...? |
Question: 10% down Option ARM Purchase price $765,000.00 1st TD $612,000.00 at 1.1% Neg AM $1575.14 2nd TD $77,220.00 at 8.5% HELOC $536.46 Hazard insurance $168.30 Property Taxes $796.88 *Total payment $3076.78 Answer: Without getting too much into it, a neg am loan is basically similar to a typical adjustable rate mortgage. Which means that when the terms of the loan change per the note, your payment will be subject to the market. So if your initial rate is 1.1% for, say, six months, your rate will jump to whatever the current market is. This could be WAY higher (like 7.5%). These loan programs exist to lure the uninitated into a mortgage without telling them that once that term is up (at this rate, it's probably just a month or two), your payment will double or triple. It's EVIL and not fair. I say STAY AWAY. As far as the HELOC, the rate is much more reasonable and, because the loan amount is smaller, you're not going to suffer as much. My advice to you is to educate yourself and ask a LOT of questions before committing yourself. |
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