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"$cott" <ezmortgageloanz@aol.com> wrote in message
news:1147860627.697053.259200@y43g2000cwc.googlegroups.com...
> The answer is it doesn't.
>
> The only thing that reduces neg am is interest and principal payments.
>
>
> In reality, extending the amortization time would have a growing effect
> on neg am not a shrinking one.
>
> Compare the total interest paid for a loan at 6.00% for a) 30 years; b)
> 40 years. You will pay 115, xxx in mortgage interest in 30 years
> (approx. 3,8xx per year) vs. 164,xxx in mortgage interst for 40 years
> (approx. 4,1xx per year). This is due to the negative effects of
> compound interest and extended time.
>
> Anyone that is selling this loan and doesn't understand the math and
> computations shouldn't be Can you explain to the borrower what could
> potentially happen under three rate scenerios (best case, worst case,
> mean average)? how can you truly say that you are doing right by
> someone when you cannot understand the math?
>
> There are only two ways to decrease neg am in any neg am loan:
>
> 1. Increase the monthly payment amount (to compensate for the
> accumulation of neg am; making interest only payments negates the
> creation of neg am; making fully amortized payments reduces the future
> possibility of neg am).
> 2. Increase the frequency of payments (combine neg am with bi-weekly
> and reduce the mortgage shelf life from 30 to 26 years and reduce the
> total accumulated neg am exposure by a min. of 33%).
>
> I know these products inside and out, so much so, that I do not
> recommend them for everyone and I do not recommend that everyone be
> allowed to sell them.
>
> Regards,
>
> Scott Miller
> National Commercial and Residential Lender/Broker
> Carteret Mortgage
> 1.877.716.6495
> EZMortgageLoanz@aol.com
>
> www.RealEstate-IQ.com
> www.EZMortgageLoanz.com
> M.D. wrote:
>> Hello Rainmaker, Im a Mortgage Broker rookie, so my question is if you
>> can
>> please explain why and how a 40-year amortization reduces the amount of
>> neg-am every month, thank you.
>>
I am sorry that I do not go back and peruse old threads more often; I missed
this one.
The neat thing about our 40-year MTA is that there is no hit to the rate or
margin. Consequently, while the borrower will obviously pay more interest
over 40-years, as Scott-with-a-dollar-sign figured out with his
four-function calculator, they actually acrue less interest due each month.
Because there is less interest due, there is less interest deferred. Make
sense?
Grab your HP (or one of the many spreadsheets available for this loan), and
do the calcs.
Now, it's Monday morning; everybody back to work!
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Re: Secrets of the Option ARM Loan (Newbie Guide)
