Mortgage Loan: Negative Amortization Mortgages

Negative amortization mortgages are loans where the monthly payment is not sufficient to cover all interest due for that month. The unpaid interest is added to the balance principle of the loan, this means that your mortgage loan is actually growing with time. There are some circumstances in which negative amortization mortgages make sense and can be a short term fix to a financial need, however, many homeowners with negative amortization experience with their mortgages and did not know. Here's what you need to know about negative amortization and your mortgage. Homeowners are being offered by many mortgage with monthly payments that seems too good to be true. If they can not ask the right questions or read the fine print discovered too late, the payment amount, not all interest due and their guides were negatively amortizing. If you take out one of these mortgages the money you save on your monthly payment will end up costing you a great deal more down the road. Normal depreciation describes the process in which, at the beginning of your loan most of your payment applies to interest and very little of the payment is applied to principal of the loan. Over time this part of your monthly payment and gradually inverts most of the payment is applied to the loan principal. Mortgages with negative amortization never achieve this reversal, there is never enough interest paid to cover the interest due. Balances guides grows with time rather than being reduced. An example of a negative amortization loan is an Adjustable Rate Mortgage that allows the house to pay a sum monthly payment option. To illustrate this concept consider a mortgage that has a standard monthly payment of $ 1,000. At the beginning of the loan, $ 650 or the payment is applied to interest, and $ 350 is applied to the mortgage principle. The same with your mortgage payment would negatively amortized from $ 500 per month, this leaves $ 150 of unpaid interest each month, which is added to the balance of the loan. Using a loan of this type, you need more for your home at the end of the month than you did earlier this month. There are some situations where having a negatively amortizing mortgage could make financial sense. If you lose your job or have an unexpected financial emergency a negative amortization option on a mortgage might alleviate the situation of cash flows. This should be used only as a short-term solution, because it will cost much more down the road. Negative amortization mortgages can also be used by property investors who want to quickly flip a property, keeping their monthly mortgage payments as low as possible. Use these loans with caution, as negatively amortized mortgages are a sinking ship that will bring your finances down with it. For more information about the options of guides and guides how to avoid common mistakes, register for a free guide guide using the link below. To get your free mortgage guide Visit RefiAdvisor.com using the link below. Louie Latour specializes in showing homeowners how to avoid common mistakes guides and predatory lenders. For a free copy of "Mortgage Refinancing: What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com. Claim your free guide today at: http://www. refiadvisor.com Apex Mortgage Refinance Article Source: http://EzineArticles.com/?expert=Louie_Latour