This post explains the concept of negative amortization loan or NegAm and at the end of this post you can download a free negative amortization calculator. Negative amortization takes place when the payment made for a loan is less than the interest due during that period. Since amortization means a reduction in the loan balance, a negative amortization implies that the loan balance actually increases.
Basically, with a negative amortization loan you get some breathing space in the beginning of the repayment period to pay less but the drawback is that the shortfall keeps getting added to the loan amount. So if you are planning to use NegAm as a strategy to get into that home that you otherwise may not have been able to afford – think twice. There is an element of speculation to going for a negative amortization loan. Most lenders have a 5-year limit on the NegAm period. After this the loan reverts or is recast to the full amortization schedule. Negative amortization loans are adjustable rate mortgages and the borrower can be exposed to “payment shock” wherein he has to face an unexpected rise in monthly payments. Negative amortized loans on a fixed rate are called graduated payment mortgages or GPMs.
An “option ARM” or “flexible payment ARM” is a type of negative amortization loan in which the borrower can choose from a fully-amortizing payment, an interest-only payment, or a “minimum” payment that did not cover the interest.
Negative amortization calculator (73)
Before you even begin a remodel, it is important that you be aware of the remodeling costs that you will incur and have an idea of how to estimate remodeling costs. You can download a free remodeling costs calculator at the end of the post.
Factors that influence the cost of a remodel include the extent of remodel, the cost of materials and fixtures, whether you wish to hire a remodeling expert or do the remodel yourself. How you choose to finance your remodel may also affect the cost; if you pay for the remodel from your pocket then you are not paying any interest as you would if you went in for a home improvement loan or a personal loan.
Estimated cost of a remodeling project
You are in a position to start the remodel only when you have an estimate of what it is going to cost you. Here is a good page listing estimated costs of almost all the remodeling jobs that you can think of.
The cost per square foot method – Take the total square foot area to be remodeled and multiply it by the per sq. ft remodeling rate prevalent in your area. The rate could be anything in the range of $150 to $750. A lot depends on the room that is being remodeled and the kind of finish that you desire. However, this estimate has a large range and may not give you the level of accuracy that you desire in your remodeling cost prediction.
Estimate for a contractor – A contractor or an architect can narrow down the range of estimates for you because of their experience in working on similar projects. You can get free online quotes by filling in the required fields in online calculators. You can get multiple quotes from different contractors and then compare cost
Housing Market in Delicate State
The news has been increasingly unanimous lately on foreclosure triggers. Loan modification programs are struggling to keep people in their homes. Unemployment is causing other, once-solvent homeowners to fall behind with their payments. Even auxiliary components, like ACORN, are imploding into themselves with disorder.
By and large, loan modification efforts are not translating into sustainable, affordable home loans for those who are at risk of foreclosure. Blame seemingly cascades back and forth between unwilling banks and unsalvageable homeowners, while the state and federal governments attempt to bridge the two sides.
Effects in areas of high unemployment are gaining momentum. Many rural towns, especially, are simply isolated from quick solutions, like new business moving into town to hire or workers or non-profit agencies that assist those in danger of foreclosure.
While ACORN has been on the receiving end of jokes for the past year, other agencies have remained in the trenches, slugging it out for troubled homeowners. Meanwhile, other third-party hucksters have surfaced in the form of refinancing scams, creating situations where people not only are not receiving help, they are also being pick pocketed very, very slowly by white-collared criminals.
Opportunity:
One of this summer’s nagging questions has been, “Has housing hit bottom?”
Certainly, a lot of homes changed hands this summer, but then again, there were a lot of homes available at lower than usual prices, made even more affordable by low interest rates. And to top it off, August came in lighter than expected, and the $8,000 tax credit is for all intents and purposes off the table by now.
Home prices should remain low, and properties available via foreclosure are likely to increase in the coming months.