Negative Amortization Loans

negative amortization,deferred interest loans

Deferred Interest, Negative Amortization and "Pick-a-payment" Loans - Are they all one in the same?


I LOVE theses loans! They are definitely NOT for everyone, but for some, especially those borrowers who are desperately searching for the

LOWEST payment

in the marketplace, this is the loan of choice! This category of loans has many names, and many different indexes to chose from as an adjustable loan. (Currently there are no 30 year fixed interest rate loans offering deferred interest.) Let's define what

deferred interest

means:

Deferred interest accrues or is created when a borrower is allowed to make a mortgage payment where the amount paid is less than the interest expense

on the loan balance that month. The deficit is added to the loan balance as "deferred interest" and creates a "

negative amortization

" where the loan balance increases instead of typically decreasing as is the case with more traditional loans.

A variety of these loans exist in the marketplace. Advertisers love to bait potential borrowers with low "PAY rates" (not interest rates) for one year, three years and five years. The reality is that people having good or bad credit, who understand the cost of money, really love these loans if they can qualify for them. Investors love them because they can use the extra would-be payments for more productive purposes. Borrowers who are in a cash flow crunch like the low payment, as well as the additional payment option available each month. They see the advantage of the additional "leverage" (controlling a large asset with a small payment) that this loan offers. More often they are simply attracted to the massive "payment relief" that these loans offer them on a monthly basis.

If you are searching for a way to consolidate your payments, reducing them to a fraction of what they were or just lower your mortgage payment to its absolute market minimum, evaluating this loan to see if it fits your needs is a necessity. At One Touch Lending, we consistently get borrowers who didn't think they would qualify, funded into these programs. Their response is usually, "WOW! Really?" This is the loan program that makes the largest difference in some lives!