When to use deferred interest (negative amortization) ARM?
Deferred interest (negative amortization) ARM loans are recommended to young families who have a good reason to expect raise in their income within several years. In that case, deferred interest (Neg Am) ARM loans can keep the initial payment low during the critical early years of homeownership. Also, the minimum payment on deferred interest (negative amortization) ARM home loans is only an option – that is, as soon as you can afford it, you could switch to making fully amortizing payments, unless you expect to move out, or refinance. Beside homeowners expecting a raise in their income within several years, deferred interest (negative amortization) adjustable rate mortgages are often preferred by investors – the minimum payment option frees up cash that could apply better to investments with higher return rather than to a house they are not keeping anyway.
