Non Traditional Negative Amortizatoin And Interest
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Non Traditional Negative Amortization and Interest
Only Mortgage Disclosure
I (we) understand that the loan that is being applied for does contain one or more of the following
repayment features (all checked boxes)
Interest Only Option
An initial interest only repayment period during the first ____ months of the loan at which time the rate maybe
fixed or may fluctuate (an adjustable rate mortgage with an initial fixed period of ____ months). The payment
that is required to be made during this period, will only pay the interest owed and will not reduce the principle
balance of the loan. After the interest only period ends the payment will increase to allow for both interest and
principle to be repaid over the remaining term of the loan.
Payment Option Adjustable Rate Mortgage Option
A Payment Option ARM (adjustable rate mortgage) period of ____ months, is a period during which the interest
rate is fixed and which there are a number of different payment options, one or more of which may include a
negative amortization period. A negative amortization period is a time during which, the minimum payment
required to be made will be less then what is necessary to reduce any of the principle balance of the loan or to pay
all interest that has accrued. At the end of the negative amortization period occurring when the option period ends,
the payment will adjust and the interest rate may adjust as well. At this time, the payment will increase substantially
to allow for the repayment of all interest that is accruing against the current balance (now up to 115% of the original
loans balance) over the remaining term of the interest only option. (See above loan.) At the end of the interest only
period, the payment will again increase to pay both interest and principle over the remaining term of the loan.
Recast Feature: If at any time the principle balance reaches 115% of the original loan balance, the loan will
recast. At that time the loan will adjust and the payment will increase substantially to pay both the interest and
principle over the remaining term of the loan.
Prepayment Penalty Provision
Both apply if both boxes are checked. The more restrictive penalty applies as long as it is in effect
A prepayment provision, with penalty period no longer than ______ months, that I(we) shall be required to pay a
penalty charge, should I(we) pay in advance an amount greater then 20% of the original scheduled balance,
refinance the loan or sell the property during the term of the penalty period. The details of which can be found on
the promissory not and or prepayment note addendum with your loan documents.
A prepayment provision, with a penalty period no longer than ______ months, that I (we) shall be required to
pay a penalty charge, should I (we) pay in advance an amount greater then 20% of the original scheduled, refinance
the loan or sell the property during the term of the penalty period, unless there is a bona fide sale of the property to
an unrelated third party. The details of which can be found on the promissory note and or prepayment note
addendum with your loan documents.
2nd Mortgage Option
A simultaneous second mortgage in lieu of a higher down payment. I (we) understand that we will have 2
separate payments each month, one for the 1st Mortgage and another for the 2nd Mortgage.
I (we) have been provided a copy of the guide:
Interest-Only Mortgage Payments and Payment-Option ARMs-Are They for You?
I (we) have reviewed the guide with my (our) mortgage originator during the loan application process and
have been made aware of an understand the potential risks associated with the loan repayment features that
have been chosen and believe that they are the best options and are well within my (our) capacity to repay,
both now and when the payment adjusts.
I (we) have been made aware that other loan programs are available that do not contain these features.
Borrower Date Borrower Date
Mortgage Originator Date