4 Dangers of the Option Arm Mortgage

It does gets worse in the coming months

         1.  The teaser rate usually ended in the first 3 months, leaving the homeowner with a mortgage rate that in today’s market ranges from 7 to 8% (index + Margin). 

           2.  The “option” that allowed homeowners to pay less than the minimum interest due (i.e. negative amortization) has resulted in many borrowers having mortgage balances that are thousands of dollars more than they started with.

           3.  Declining property values along with the higher loan balances created by a negative amortizing loan may create a double whammy for homeowners with these programs.

           4.  Prepayment penalties lock in homeowners for up to 3 years, which effectively prevented people from refinancing into a lower or fixed rate. Read business week online—NIGHTMARE MORTGAGES

         Most of these “Option Arm Mortgages” have an index that is based on an “average” index value over the last year.  Thus, expect your “base” or “note rate” to continue rising, even after other short term and long term rates start to go lower.      

What is an Option Arm Mortgage?

An pay option arm mortgage is a true variable rate mortgage that changes monthly.  These program’s usually offer a teaser rate the first three months along with the “option” of a low interest only payment option and a 2nd even lower payment “option” that results in a negative amortizing loan (i.e. your loan balance increases).

What Should I do with my Option Arm Mortgage?

         Call us today at 415.989.0787.  We will review alternatives to both lower your rate and provide your with a first mortgage that will fix you payment and interest rate for the next 5-7-10 years.read article from CNNmoney.com

Refinance out of your option arm mortgage

call us today!

415-989-0787

Michael Logan - Broker