The Case for Neg Am Loans | Phil Caulfield 650 222-0386

Negative Amortization adjustable mortgages are looked at as if they are inherently evil in the current economic situation we find ourselves in. However, if you look beyond the surface, a case can be made that this type of  mortgage will be a good bet for the foreseeable future.

Lenders that offer this type of loan often base the rate on the Twelve Month Treasury Average index. This index is a rolling average of the monthly average of the One Year Treaasury Bill. As each month goes by, the rate for the oldest month in the average drops out, and the rate for the newest month is added.

Currently, the Twelve Month Treasury Average is at 4.076%. The current yield on the One Year Treasury Bill is 1.33%. What does this mean?

You are right - the Twelve Month Treasury Average Index rate is going down. If you can get a low margin, you are going to have a pretty good rate compared to what else is being offered in the mortgage marketplace.

Of course, discipline is required for this type of loan. I recommend either making the interest-only payment, or saving the difference between the minimum payment and the interest-only payment in a safe side account with a compounding return that outpaces the negative amortization accrued.

 Before you make your next jumbo loan choice, ask your mortgage advisor about a negative amortization loan!

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Phil Caulfield
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Comment balloon 6 commentsPhil Caulfield • March 26 2008 12:48PM
The Case for Neg Am Loans | Phil Caulfield 650 222-0386
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Negative Amortization adjustable mortgages are looked at as if they are inherently evil in the current economic situation we find ourselves in. However, if you look beyond the surface, a case can be made that this type of mortgage will be a good… more
Who Has The Lowest CA Jumbo Loan Rates? | Phil Caulfield 650 222-0386
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There is plenty of information being disseminated as to why jumbo mortgage rates have increased recently. What hasn't been discussed as much is that there are some lenders who are offering attractive jumbo rates - you just need to do a little work… more