Timba, either the 1.25% mentioned by the article is incorrect, or it is negam. later in the article, it gives this example of an option ARM:
On a $400,000 loan, for example, a buyer who made only minimum payments over the first five years would add more than $27,000 to the end of the loan, assuming short-term rates increase by one percentage point over the course of the loan, said Robert Binette, a mortgage broker with Hamilton Mortgage in Ridgefield, Conn. The monthly payment would jump from $1,718 in the final month of the fifth year to $2,580 after the loan was reset, a difference of more than 50 percent.
in this case, the excess interest not paid is only $5400 per year, or 1.35% of the original 400K on average per year, so the minimum payment option must be quite a bit higher than 1.25%. |
