Another mortgage question if you dont mind :)

[binny]

My mortgage guy told me about this
http://mortgage-x.com/library/option_arm.asp

a Pay Option ARM.

He thinks this might be a really good way to go.
Does anyone have any experience with this type of a loan?
Thanks for being patient with me

 

[ChrisnSteph]

According to the link:

Option ARM loan programs are right for you if you'd like to own your property only for a short time, and prefer affordability and flexibility in your monthly payment. However, if you select the minimum payment option in the early years, you should be prepared for possible sudden increases in your monthly payments thereafter.

If you can afford higher payments later, or if you aren't planning on staying in the house, then go for it. Otherwise, at this point and time I'd stick with a 30 year fixed.

 

[chrissyk]

Money Magazine has an article this month called "Is this how the housing boom ends?" I think that you can also read it on their website. Anyways, it lists the "option ARM" as the riskiest of all of the "exotic" mortgage options available right now.

 

[Miss Jasmine]

Ick, unless this is short term house, I would run far, far away.

 

[AllyandJack]

Even if it is short term, unless it's an area that increases in value rapidly and/or the house needs a ton of work that you plan to do which is guranteed to raise the value of the house, you'll probably only get back your initial investment....maybe not even that when you're done paying a realtor commission.

 

[ducklite]

NO NO NO!!!!!!!

This is a negative amortization loan, and I can think of ONLY ONE TYPE OF BORROWER who this loan would be good for--and that borrower is extremely disciplined, financially savvy, has considerable liquid or near liquid cash assets, and has varying monthly income due to being self-employed or getting large commissions or bonuses. This borrower would easily be able to afford a fixed rate product, but desires financial flexibility to be able to consider certain short term investments on a month to month basis. With the probably 2000 mortgage loans I wrote while I was in that field, I can think of three, maybe four people who I would have even suggested a product like that for.

Anne

 

[chrissyk]

Anne, why do you think that the broker trying to push this type of loan on the OP when it is probably a bad idea for him/her? DH and I were actually discussing this situation tonight, as we both read an article on how risky this type of loan is. The only thing that we could figure is that the mortgage broker is somehow making a bigger commission on this type of loan than he would make on another type of loan.

 

[binny]

actually the mortgage broker is a friend of ours. He has this type of loan himself and was saying that he thought we could handle it as well. We do a lot of business together on other things that we are both involved in so he knows us pretty well.

He explained that he was scared of it for the longest time but once he got into it he found it worked really well for him.


Anyway, thanks for the input.

 

[ducklite]

Anne, why do you think that the broker trying to push this type of loan on the OP when it is probably a bad idea for him/her? DH and I were actually discussing this situation tonight, as we both read an article on how risky this type of loan is. The only thing that we could figure is that the mortgage broker is somehow making a bigger commission on this type of loan than he would make on another type of loan.

That's exactly what it is. Also some brokers just seem to always be jumping on the "loan du jour", rather than specializing in one or two types of loans.

Anne