Negative Amortization Mortgages

• Up to 4 payment options each month
• Loan balance will increase each month
• Most beneficial for short term real estate investors
• Increases cash flow for the borrower

Negative amortization mortgages have some very unique benefits and some disadvantages as well.  Negative amortization mortgages are also known as option arms, neg-am loans, pick a pay loans and 4 option arms.  These loans generally have 4 payment options each month which include a 30 year fixed payment, 15 year fixed payment, interest only payment and a minimum payment.  The fully indexed rate is generally adjustable each month and the minimum payment is usually fixed at an interest rate between 1% and 4%.  Negative amortization loans can take many different forms and it is important to find out all of the details before financing a home with a negative amortization mortgage.  These loans can be very beneficial for borrowers that have a large amount of equity in their home and for short term real estate investors.  The negative amortization mortgage allows the borrower to keep more cash in their pocket each month for individuals that have a need for cash flow such as investors.

Home Equity Loans

• Use the equity in your home to receive cash
• Cash can be used however you wish
• Reduces the equity in your home
• Pay interest only on the money you have drawn

A home equity loan can be a great tool for a homeowner.  Home equity loans require you to make interest payments only on the amount of money that you have drawn from the account.  Homeowners that have equity in their home can open a home equity loan and not draw any of the money until they need it, thus avoiding payments on the account.  It is great to have a home equity loan set aside in case of an emergency but a home equity loan can also be used to pay off debt, make home improvements, pay for education, take a vacation and anything else that the borrower would like to use the money for.  It is recommended to open a home equity loan before you need the money in case something happens and you don’t qualify in the future, if you never need it you will owe nothing.