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
2006-11-03 12:19:32 · 6 answers · asked by memehb2 2 in Business & Finance ➔ Renting & Real Estate
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.
2006-11-03 14:35:15 · answer #1 · answered by Kristen K 4 · 0⤊ 0⤋
I would go for a fixed rate on the 2nd mortgage and stay away from the HELOC right now. The fixed rates are lower. You will only be in a negative AM if you make the minimum payment. You should have 3 or more options.
These are good loans if you know for a fact you are on a fast track to make more money within the next year or so and you intend on keeping the house. They are also good if you are in an area of rising house prices and only intend to keep it for a short amount of time and then flip it, hoping the rise in price matches and exceeds you negative AM.
2006-11-03 20:28:05 · answer #2 · answered by Realty Shark 4 · 0⤊ 0⤋
Okay, so you're happy with the payment now.
If you make that total payment you stated, and accept the negative amortization, what will your payment be when it's recast?
I'm ballparking your starting total payment if you pay the minimum at about $2,000, and if it recasts at 5% after a year, at around $5,000 total. Taxes and insurance rarely go down, btw.
2006-11-03 21:04:25 · answer #3 · answered by open4one 7 · 0⤊ 0⤋
Todays rate is 5.7% on a fixed rate your payment is $3,996.06
With taxes & insurance your payment would be $4,927.91. Right now your payment is lower but in the long run you will pay a lot higher monthly payment, if your rate was that 8.5% it will be $6,225.82.
2006-11-03 22:51:17 · answer #4 · answered by bigslick60 3 · 0⤊ 0⤋
Not sure what Neg AM is.........but it sounds like negative amortization which does NOT sound good. I would not do it. Not in a million years.
ALSO....the ARM is BAD NEWS. If this is the only way you can get the loan, dont do it. Always go with a fixed rate even though its higher.
2006-11-03 20:30:34 · answer #5 · answered by Anonymous · 0⤊ 0⤋
The little * by total means it can and will be more, due to the arm and neg am.
The first rule to follow when you are in a hole is to stop digging deeper. Just by asking the question your are in a big hole and it does not even seem you know it yet.
Best of luck.
2006-11-03 23:01:31 · answer #6 · answered by Anonymous · 0⤊ 0⤋