Should I Refinance?

 

What is an Option ARM Mortgage

This mortgage loan is a 1 month adjustable rate mortgage that allows
you a minimum mortgage payment that is less than the actual interest
that has accrued within that month. If you only pay the minimum
payment, this will result in negative amortization (see definition
below).

Up until just one month ago, that was the only option arm available on
the market. Now, there is a new Option ARM Mortgage that has a fixed
rate for an entire 5 year period. This feature now makes this loan
program very attractive to many. If you choose an Option ARM, the 5
year fixed is the way to go.


                  5 Year Fixed Option ARM

Here are some of the other names for the option arm created by the
mortgage industry to make it sound like a more attractive mortgage
loan:


Pick a payment Interest only Power Option

Flex-Pay Option COFI loan Negative Am loan


The option arm mortgage is really designed for the borrower that has
irregular income such as being self employed or commissioned and needs
the flexibility of the option arm. For most homeowners, this is not
the best choice. Unfortunately this mortgage loan has been marketed to
the masses. There are many misconceptions about this option arm
mortgage loan due to the mortgage industry promoting this mortgage in
ways that are misleading to "reel you in".


The Option ARM loan product is one of the "Hottest loan products" and
also one of the "Worst loan products". The reason for this is that for
90% of American homeowners, it's a terrible mortgage loan. For the 10%
or less, it's the best thing that could have happened to them.


Get the best mortgage quote now at www.real-mortgage-quotes.com

or

Read: Deceptive mortgage advertising practices at www.mortgagesearchexperts.com


Option Arm Terminology and Facts

How to calculate the interest rate you're actually paying:

Your payment is based on adding the margin to the index to determine
the fully indexed rate. The rate adjustment will happen on the
following month each and every month.

Types of indexes used and your choices

MTA, Libor, COFI. If you choose this mortgage, the MTA is a better
choice because it fluctuates a little less.

Negative Amortization

That interest owed gets tacked on to your mortgage balance. You're not
saving anything; in fact you are borrowing that money. Interest is now
accumulating on the balance and the interest you didn't pay. It's like
paying double interest and your mortgage balance can grow quite
quickly.


Myths and Truths about the Option Arm Mortgage

Myth: Use the money you save on your mortgage payment to place in
investments.

Truth: This is a sales pitch used for this type of loan but it still
doesn't make good financial sense. The money you "save" is actually
the interest that you didn't pay that month. That interest owed gets
tacked on to your mortgage balance. You're not saving anything; in
fact you are borrowing that money. You should not borrow money to
invest. You are also paying a higher rate on the option arm compared
to other mortgage loans, costing you even more.

Myth: My home will appreciate as my mortgage balance increases. So
this is nothing to worry about.

Truth: Again, This is another part of the pitch you might here from a
loan officer that proposes the option arm mortgage. Tacking interest
on to the balance and then paying interest at a higher rate than most
mortgage loans does not make financial sense. Besides, there is not
guarantee that your home will increase in value.

Myth: With such a low mortgage payment, I can use the extra money to
buy other things and enjoy life more.

Truth: Anyone that uses this principal in regards to their finances
will be in real trouble sooner or later. This is horrible advice but
some loan officers will still use this line. Don't take any mortgage
loan from someone that gives you such bad financial advice.

Question: Should I refinance my option ARM?

Answer: Yes, You can benefit more with the 5 year fixed option arm or
another mortgage loan. There is no reason why you should stay with a
one month adjustable rate mortgage. Interest rates are still good, so
make the move now. Compare your options here.

For some, this product may still provide the flexibility in low
payments that are needed. If you are a seasonal worker, commissioned
professional, or paying down credit card debt, you may want to hold
off. But remember, you are now paying a premium for your low payment,
so remember what your goals are and then refinance as soon as you
can.


Get the best mortgage quote now  at www.real-mortgage-quotes.com

There are many alternatives that can accomplish the same goals with a
lower rate of interest using sound financing principles.


For more information on all mortgage products please visit
www.real-mortgage-quotes.com and www.mortgagesearchexperts.com.

 

Calling that scam a mortgage is a misnomer.  In a mortgage, you
expect to own the house someday.  In this scheme, you actually
end up owing more and more until you have to file bankruptcy
and lose everything.  Don't fall for this kind of scam.  The
only people who make out are those who take your house and sell
it to the next set of victims.

-john-

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John A. Weeks III           952-432-2708            john@johnweeks.com
Newave Communications                         http://www.johnweeks.com
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