Question:

If we are accounting for negative amortization, should we get such a mortgage loan?

Answer:

Accounting for negative amortization mortgage loan features helps you avoid possible foreclosure issues. You've got to know how your mortgage payment is going to change over the years, if you make

  • Minimum payment, leading to negative amortization;
  • Or, make the minimum payment when you need it, but otherwise keep making fully amortizing payments.

Keeping an account of your negative amortization mortgage will help you make it work for you.

Sometimes, a negative amortization mortgage is the best home loan when you need to satisfy other debt obligations. Taking a mortgage loan with deferred interest will free up a lot of cash. Being debt-free in 3 years in exchange for a mortgage with 10% increased loan balance is sometimes worth it.

Also, if you are uncertain about staying in your home for more than 3 or 5 years, you don't even need to take the negative amortization effect into account. You might be selling and moving out anyways, so why not make use of low payment options?

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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