BEWARE of the 1% Mortgage Offerings/ Option ARMS.

There are tons of people offering these 1% payment programs and they make them sound like the deal of a life time, but what they don't tell you is the meaning of "NEGATIVE AMORTIZATION". What does that mean you ask?

These lenders want you to think that you are getting this great LOW LOW LOW 1% rate fixed for say 5 years, wow that sounds like one heck of a deal. But the facts are the fully indexed rate is more like 6.5% which means IF you paid the 1% minimum payment each month you are shorting the lender 5.5.% of interest each and every month. By shorting the bank they are not going to just forget about that short payment each month so they add it to the money you owe the lender this is called "NEGATIVE AMORTIZATION" this is when you pay the bank less money each month than the actual money due and instead of paying down you mortgage monthly you are adding money that you owe to the mortgage. Here is an example:

$300,000 Loan amount @ 1% MINIMUM PAYMENT = $964.92
The actual interest rate fully indexed is 6.5% which means you should be paying a payment of $1,896.20 per month so you are short paying the bank $931.28 that month and now you owe the bank $300,931.28, then next month the lender/bank figures the new payment due based on $300,931.28 and if you pay the 1% again then you are adding another $937.17 to what you owe so in month # 2 you have made 2 payments but now owe the bank $301,186.45. You can only imagine how much you would owe the bank/lender in 5 years if you only made that 1% payment each month!!!! You can see in just 2 months how much you have been put in the hole...

Don't get fooled by these 1% deals, these lenders don't want you to know what you are really getting suckered into. They are looking just for your business.