Are $200,000 Dollar Mortgages at $650 a Month Realistic?
Of course they are, but buyer beware. I have people calling me all the time asking me why the can't have a $200,000 dollar mortgage only paying $650 a month. The truth is they can, but for some people those kind of loans just aren't good. The part no one ever mentions when advertising such a loan program is that the excess payment is added on to your loan total.
For example, if you took out a $200,000 dollar loan it would typically cost you $1300.00 a month. Instead of paying $1300.00 you pay $650. 1300-650= 650, The excess added to your loan is $650 making your new loan amount $200,650.00 next month.
This loan program is called a negative amortization loan. Most mortgage companies call it a pick your payment plan, it has more sales appeal that way. This type of loan has gotten a lot of home buyers in trouble. I am shocked by how many people want this type of loan, yet are unaware of the full nature of the loan. It is in my opinion that these loans were made for investment properties and people with a commission based salary.
The loans are perfect for people who are planning on selling that house in a year or more because it would only add $7800 to the loan amount per year, most home values would increase more then that in 1 year. The commissioned based salary people, like me, have fluctuating income. This month could be little, next month can be a lot, allowing us to make us for the months we only paid $650.
I recommend that all borrowers research their loan programs before meeting with a broker. Also, it is important to find a Mortgage Broker that is trustworthy and would disclose all the important information associated with a particular loan program. It saddens me and stains our profession that some brokers only care about making money.
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