I just learned about something really devious called a negative amortization mortgage (or any other type of loan). As Dr. Don explains:
Negative amortization means that your loan balance is increasing instead of decreasing. With a negative amortization loan, when your monthly payment on an ARM (adjustable-rate mortgage) isn't enough to cover the interest expense and principal payment, the shortage is added to your loan balance.Say, for example, than in a normal mortgage your monthly payment is $2000. Of that, $400 may go towards paying off the principal and $1600 may go towards paying interest on the loan. With a negative amortization mortgage your monthly payment on the same size loan could be $1200 instead of $2000, but each month the entire $1200 would go towards paying interest -- and an additional $800 could be added to your principal. Thus, at the end of each month you owe more on your house than you did at the beginning of the month.
Actually, the extra money would be added to the loan's principal, not its principle.
BB: Duh, fixed, thanks.
hello
i'am in the process of renovating my house for resale, i would like to stop working my fulltime job and work on the house full time, my mortgage guy reccomended a neg am loan so that i can draw lots of equity cash out of the house and still have a much lower payment than before, we will sell the house in less than 6 months, is this a good thing to do or not it seems feasiable to me except for maybe the pre payment penalty,my wife works and covers all expenses my pay check was being saved.
thanks david
I am goint into normal retirement in a year. My home is paid off and its current value is about $800,000.
What is the best way to use my house for extra money to spend in my retirement year?
thanks
If you are 62 years or older, I would recommend looking into a Reverse Mortgage to tap into the equity from your home during retirement years. Check it out for yourself:
http://www.reversemortgage.org/Default.aspx?tabid=230
ypm