Posted by Brian (WA) on April 26, 2007 at 11:39:36:
Lana,
Unless your broker explains the pros and cons of this type of loan do not get into it. I’m not saying it is a bad loan, it has it’s purpose but unless you fully understand how it can help you and how it can hurt you I would hold off on signing up for it.
How is this loan going to help you besides having a lower payment and what did your broker explain to you?
I have refinanced several people who didn’t understand the mechanics of their neg am loan and once they were fully aware of what was happening they wanted out immediately.
Does anyone have any thoughts on this subject? I need to refinance my property in order to have much lower monthly payments and my mortgage broker advised me on this product.
Option arms are great loans when used correctly. First things first you have to get into to right option arm. They are not all negative amortization loans, some have deferred interest in the begining (2-3yr)and then pay off principle. Others are just neg-am and you will have to refinance in 3-5 yrs. You can also set your payments where you want them and reduce or eliminate all the neg-am, with a lower payment than 30yr or interest only. I specialize in option arm loans, as do many brokers, however, other brokers are only selling them to offer lower payments and let you fiuger out the rest on your own. Again, these are great loans when used correctly. You can email me if you want more information on how these loans work or reach out to a broker specializes in option arm loans. ronsam4@yahoo.com
Many brokers like these loans because the lender will pay them up to 4 points “on the back” and they can still quote the borrower the attractive “1.5%” rate.
If you are going to go that route make sure you are dealing with an “upfront broker” that is going to fully disclose the compensation the receive “on the front” and “on the back” from the lender.
Also, have them look at hybrid products that decrease the amount of potential negative amortization.