2007-03-21 07:33:39 · 2 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
The 1% loan is a negative amortizing loan. In other words- your principal balance will increase every month you make that 1% minimum payment. Your 1 % payment is less than even the interest accruing monthly. Not a terrible loan if your are in an improving market- but there are very few of them left out there! You do get 3 other payment options each month on that loan type- interest only, 30 year fixed, or 15 year fixed payment options. The other down side is the "real" interest rate is generally much higher than that of a typical interest only or full amortizing loan. They do have 5 year fixed index option arm loans now that are better than the older version as they have a fixed rate and index for 5 years though. The old version is a monthly adjustable index + a margin added with typical full amortizing rates at 8+%. Be careful of pre payment penalties on this loan type as well as most will have a 3 year pre payment penalty on them. You can reduce or even eliminate the pre payment penalty- but the loan officer will not like it as it all bu eliminates their commission on that loan.
2007-03-21 08:10:47 · answer #1 · answered by flamingojohn 4 · 0⤊ 0⤋
The problem is that you are going into a new home with no equity, therefore you become a much higher risk for a problem if there a foreclousure...
Unless you can work out a great deal you will be paying out an awful lot in interest.
2007-03-21 07:37:41 · answer #2 · answered by Anonymous · 0⤊ 0⤋