The 1.% Mortgage…

Also known as the Neg-Am Loan or The Exotic Loan. This mortgage has had a lot of bad press and is blamed for getting borrowers into trouble with their banks. The truth of the matter is that this is a great vehicle when used correctly. First, you must not only qualify for the loan, you must be able to make the fully indexed interest rate payment. The idea is to pay the 1.% minimum payment towards the mortgage and invest the balance of your fully indexed payment into a vehicle that gives you a rate of return of 6% or more. Over long term this can turn into a nice nest egg. Other ways to utilize the money to your benefit would be to pay off high interest rate credit cards, put the money aside for a college education or a daughters wedding. Abuse of the program is what gets borrowers in trouble, not the program.