Mortgage : Home Loans : Refinance : Home Equity Loans

By Ben Afzal

1% Mortgage Loan

Have you seen the ads everywhere for “1% Mortgage Loans” - offers that show how you can chop you monthly payment in half?

These loans go by many names:

-payment option loans
-pick your payment loans
-option ARMs
-negam loans

This type of loan has become very popular recently, particularly in places with high and escalating real estate values where the loan can allow people to buy or keep expensive properties that may otherwise be out of their price range.

The 1% loan is a loan that has to be understood first because it can be good or bad, depending on your circumstances and goals.

The 1% mortgage rate is usually an introductory rate (the APR or annual percentage rate is usually much higher, at 6.5% or more).

The 1% interest rate may only be for the first month.

The appeal of this type of loan is that it typically allows you to make a choice each month about how much you want to pay for your mortgage.

Payment Choices For 1% Loans

These choices each month are usually:

-a minimum payment (usually less than the interest-only level)
-an interest-only level
-a 15 year amortization level
-a 30 year amortization level

For example, a 1% minimum option loan on a $400,000 loan with a 30 year term can have four different initial payment levels:

-the minimum payment of $1,287
-an interest-only payment of $1,649
-a 30 year payment of $2,134
-a 15 year payment of $3,152

When you get your bill, you can decide that month how much you pay.

Quick Features Of 1% Loan

Here is the first catch: when you make the minimum payment, any amount short of the interest-only payment is added onto the principal of the loan. For example, if:

-the minimum payment is $1,200 per month
-interest only payment is $1,500 per month
-you are increasing the size of your loan by $300 if you only pay the $1,200 minimum payment ($1,500 less $1,200).

An increase in your l!
oan size
is known as

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For additional Mortgage Refinancing information
and resources visit Mortgage Refinancing.
(http://www.refinance-refinance.net)
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This entry was posted on Saturday, June 3rd, 2006 at 2:16 am and is filed under Refinance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.