Here is the deal, buying a condo townhouse 3 floors @ 1400 sq feet in san jose cali close to highway 87 .. up in the hills for 600K.. i want to get some advise that if i do option arm with -ve amortization which will at the end of 1st year put 12k extra on the 600k amount, so my principal would be 612000.
Is it a good deal ? The condo townhouse are brand new.
2006-06-28 13:35:12 · 5 answers · asked by Jack 1 in Business & Finance ➔ Renting & Real Estate
Jack I live and work in SJ myself and contrary to what others might have told you an Option Arm is not illegal here in Cali BUT they are certainly very dangerous loans for some buyers. At the same time, these are VERY good loans for others.
I have one of these loans on one of my investments that I have rented and the tenants basically pay for the minimum payment and some more so basically my negative amortization amount is not as great as it would be if I only made the minimum payment only. I am using this loan because this is only an investment for my future that is all.
There are other cases where it might be beneficial to a homeowner but in general I would not suggest it because interest rates are still expected to go up some more.
If you would like more information on these option arm loans visit this website and read the article "Loans with 1% minimum payment? *Be careful* Get informed!" in the issue of November 2005.
Anywho by the looks of it, your so called loan officer did not do a good job at explaining to you how this loan could be beneficial or detrimental to you. I suggest you find one that will. When purchasing a loan it should be like going to the doctor. You tell me your symptoms and I find the best cure for your illness and I explain the procedure and also mention other possibilities.
If you want you can contact me Jbienesraices7@yahoo.com
Good luck
2006-06-29 08:20:17 · answer #1 · answered by SCCRealEstateUNCENSORED.com 3 · 1⤊ 0⤋
If you make the minimum payment every month the loan will amortize negatively. However you have options every month, you can make the minimum payment, the interest only payment, 30 year amortized payment, or a 15 year amortized payment. Depending on the margin, some of these loans are a great cash flow tool. If you plan on keeping the property for less than 5 years, this would be a good deal. Anything longer than that and you would be better off with 3 year interest only loan.
2006-06-28 21:24:10 · answer #2 · answered by Martin 2 · 0⤊ 0⤋
That amount of negative am, will reduce each year over a 5 year period as your initial start rate increases on the averaqge of 7.5% each year.. Your homes appreciation at a national average of 8.8% should easily offset the negative. The added advantage is the tax write off. I would not recomend this loan to anyone who plans to retire in the house, but it is a good vehicle for the short term and for qualifying purposes. If it is a real concern, elect to pay the interest only option and avoid the defered interest.
2006-06-28 21:05:08 · answer #3 · answered by Anonymous · 0⤊ 0⤋
stay away from ARMS with no money down..it is a horrible idea when rates are heading up..and they are...so budget how much you can afford on housing...and try to lock in a fixed rate for as long a time as you can...if this won't let you afford the house you want then you need to look elsewhere....yourt monthly payment 3 years from now will be much higher than today..don't do the bank a favor by falling for this...be smart..banks are there to make themselves money...they trick you by acting like a friend....
2006-06-28 21:15:39 · answer #4 · answered by mayigniteunderpressure 3 · 0⤊ 0⤋
NEVER sign a negative amortization deal! They're illegal in some states for a very good reason!!!
It's a great deal for the lender and totally CRAP for you!! If the bubble should burst, you'll REALLY be in the CRAPPER without an umbrella!
2006-06-28 20:39:20 · answer #5 · answered by Bostonian In MO 7 · 0⤊ 0⤋