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By Chuck Christensen

Mortgage and Lending with Your Financial Coach

April 30, 2007 08:44 AM

Is this it is all cracked up to be...NO...Option ARMs can be dangerous if you don't completely understand them...they are good for self employed and small business owners that have seasonal monthly income...but it is important to pay more than the minimum. The minimum is the one to pay for seasonal employees when they are out of season. But they all usually have a negative amortization effect.

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Beth Bastian

Rosemont Financial Inc - Simi Valley, CA

Simi Valley Real Estate

The pay option arms are more dangerous than we give them credit for. There is a place for them, just not for everybody.

Apr 30, 2007 09:17 AM

Anonymous

Chris

What a great understanding of the industry. We purchased a new house last year with very little down. We could have put more down, but Chuck showed us why we should keep our money in our pockets and not give it away. Simple interest vs compound interest! Chuck is a Financial Advisor also and really understands the industry, from buying and selling houses, flipping properties and buying fixer uppers to Forclosure auctions. I learned alot and also set up my Life insurance and Roth IRA's for me and my wife. I finally understand how money works and learned the "Rule of 72"! WOW

Apr 30, 2007 09:30 AM

Michael Hutchins - Consumer Advocate, Chicago

Michael Hutchins Ent. - Chicago, IL

Hi Chuck, Pay Option ARMs can be and usually are a disaster waiting to happen. Most of the time, the buyer can qualify for a much lower rate than the Pay Option ARM, and they don't have to worry about Negative Amortization either. Bottom line is that 99 times out of 100 there is a product that is better suited to the borrower.

Apr 30, 2007 10:47 AM

Chuck Christensen

Your Financial Coach - Bellingham, WA

There is no doubt they can be a disaster....but with good disapline, they can be favorable. The problem that gave them a bad rap is mortgage brokers that did them just to get people qualified and into a home they could not afford. Last year most lenders had a 1% to 1 1/2% start rate, and that made payments half of what they should have been...now we have a record amount of foreclosures. One should not always make just the minimum payment, but I realize most people only like do do the minimum required to get by. That also carries over to record credit card debt and further onto bancruptcy...GEE! this sounds like a drug addiction...just try it...one time won't kill ya! Ok, neither will 2.....or 3....

May 01, 2007 05:05 AM