But you are not really saving that $351, the difference actually gets added on to the principle of the loan (The amount you owe on your house) also known as negative amortization. If you keep up this practice you will end up owing a hell of a lot more You've seen the ads, "Get a $200,000 mortgage for only $899 per month." What a hook! We should all be so lucky. It sounds to good to be true, doesn't it? Well, in fact it is true. You can have that $200,000 mortgage for $899 per month, only it's going to cost you a hell of a lot more than that in the end.

In fact, what the advertisements are promoting are start rates for Option ARM loans. An option ARM is a loan that has a extremely low start rate (The Swami has actually seen a 0% interest rate). The rate is only good for one month and then adjusts to the current fully indexed rate every month. However, the bank only requires you to make the payment based on the start rate for the entire first year.

EXAMPLE: Let's say your $200,000 mortgage had a starting payment of $899 per month and the following month the interest rate jumped and the payment went up to $1,250 per month. The way the loan works is that you still only have to make the $899 payment saving you $351 every month.

But you are not really saving that $351, the difference actually gets added on to the principle of the loan (The amount you owe on your house) also known as negative amortization. If you keep up this practice you will end up owing a hell of a lot more o

to cost you a hell of a lot more than that in the end.

In fact, what the advertisements are promoting are start rates for Option ARM loans. An option ARM is a loan that has a extremely low start rate (The Swami has actually seen a 0% interest rate). The rate is only good for one month and then adjusts to the current fully indexed rate every month. However, the bank only requires you to make the payment based on the start rate for the entire first year.

EXAMPLE: Let's say your $200,000 mortgage had a starting payment of $899 per month and the following month the interest rate jumped and the payment went up to $1,250 per month. The way the loan works is that you still only have to make the $899 payment saving you $351 every month.

But you are not really saving that $351, the difference actually gets added on to the principle of the loan (The amount you owe on your house) also known as negative amortization. If you keep up this practice you will end up owing a hell of a lot more

e). The rate is only good for one month and then adjusts to the current fully indexed rate every month. However, the bank only requires you to make the payment based on the start rate for the entire first year.

EXAMPLE: Let's say your $200,000 mortgage had a starting payment of $899 per month and the following month the interest rate jumped and the payment went up to $1,250 per month. The way the loan works is that you still only have to make the $899 payment saving you $351 every month.

But you are not really saving that $351, the difference actually gets added on to the principle of the loan (The amount you owe on your house) also known as negative amortization. If you keep up this practice you will end up owing a hell of a lot more

tgage had a starting payment of $899 per month and the following month the interest rate jumped and the payment went up to $1,250 per month. The way the loan works is that you still only have to make the $899 payment saving you $351 every month.

But you are not really saving that $351, the difference actually gets added on to the principle of the loan (The amount you owe on your house) also known as negative amortization. If you keep up this practice you will end up owing a hell of a lot more

But you are not really saving that $351, the difference actually gets added on to the principle of the loan (The amount you owe on your house) also known as negative amortization. If you keep up this practice you will end up owing a hell of a lot more on your home than when you started. If you are not careful, this could end up putting you in a lot of trouble.

Now, The Swami is simplifying things here to illustrate his point. However, it should be noted that this loan can be dangerous for most consumers and they should stay away from it. If you can't afford the housing payment based on actual current interest rates, then you shouldn't buy the home or refinance for that much money.

Many mortgage brokers and lenders will try to push this loan because it is very profitable and the commission paid by the banks is very high. Avoid the temptation and stay away from this dangerous mortgage product. You will be glad that you did.