Negative Amortization: A Real Threat?
Hi,
I am in the process of taking on one of those new loans that allow you to make different levels of payments for a set period (I'm not sure what they are called). My mortgage broker has found one that only goes to 80% but is having a hard time finding a lender to cover the remaining 20%. Does anyone know why it would be difficult to find a lender for the 20% balance on this type of laon? Will I be able to make this deal worl at a total of 100% Financing?
Also, Is this loan advisable? I don't intend to pay the minimum payment every month, but I want to have that option just in case I have a month that goes bad or have no tenants.
Thanks in advance for your help. 
It will be tough to find LTV higher on that type of loan. If you think about it, if only the required min. payment is made, the principal balance will continue to grow. Ok for you if you plan on holding the property and it continues to appreciate at a rate equal to or greater than the accrueing interest that is being added to the principal balance. From the LENDERS point of view, if only the minimum payment is made and the property is not appreciating or worse yet.. the property depreciates, they will have a much lower LTV exposure very quickly. Even though you say you dont intend on making only the minimum payment, that is all you are obligated to make and the bank will look at worse case.
Hope that helps you understand why it will be tough to find. I know it didnt help in terms of where to find it.
The reason banks won't go behind that isn't because of the neg-am but because it is an adjustable rate. If you look at the note and the mortgage depending on what bank you are going through your rate can go as high as 11.95%. Of course it never has done that YET, your loan is based on one of two things. The MTA which is published weekly in the Wall Street Journal (Thursdays). Or the average of CD"S Checking And Savings account rates. You probably won't debt ratio and most people don't based on the fully amoritized potential payment. That is why banks have generaly cut this out. It wastes time when they are going to be denied anyway.
There is probably alot of things in this post that you don't understand call your broker and have him explain it to you.
Lori
[addsig]