No. of Recommendations: 0
Most likely the 4% is not a teaser rate but a payment rate. The mortgage being offered is a negative amortization option ARM. For the initial period, you can make payments as if the interest rate were 4%. The additional unpaid interest is capitalized (added to the loan balance). The privilege of borrowing more money expires in 5 years or when your total loan balance gets 15% above your initial balance.

Oh, and the actual rates on this mortgage are much higher than on conventional mortgages.

Thanks for the correction. "Teaser rate" is for a different kind of "creative" mortgage.

Is there a general term for these "creative" mortgages that let people pay less than going interest rates, basically on the presumption that they will be able to refinance or sell with the home worth enough more than the purchase price to cover the balance and fees? I use "teaser rate" loosely as a generic term, but I agree it's not correct.
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.