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Negative amortization is a bad ideaQuestion : I am thinking of refinancing to pay off credit card debt, but I live in Texas and my loan-to-value ratio is too high to get cash out. I have been offered what is basically a negative amortization loan, a five- or seven-year ARM where the rate is locked in. If I take the minimum payment option I can use the extra money each month to pay off credit cards but I am worried about how much I will be adding to the back of the mortgage loan.Answer : Replacing credit card debt with mortgage debt doesn't pay off your credit cards; it just restructures your finances. According to Bankrate's 2006 closing cost survey, the average cost of refinancing a first mortgage is $3,024. You're considering doing that twice in two years. Paying $6,048 to restructure $12,000 in credit card debt isn't going to save you money. Would you pay six grand to refinance 12 grand? I wouldn't. Negative amortization exists when your monthly mortgage payment isn't big enough to cover the interest expense. The shortfall gets added to your loan balance. Instead of paying down the loan, your loan balance increases with time...... click here for complete article Need to sell you home, condo or building lot? Visit 888SOLDin9 to talk with our Jacksonville FL 888soldin9 partner about your personal financial situation. Our Jacksonville FL partner, Jim Tallent buys, sells, renovates and rents homes and properties in Jacksonville FL, Duval County FL and Northeast Florida. |