One of the important questions to ask about a new home mortgage has to do with its amortization. How your mortgage loan is paid down has a great deal of bearing on how much money you can save in the future, as well as how quickly you build equity.

Amortization is the process behind paying off your mortgage loan over time. In a traditional 30-year mortgage, part of the balance is paid off from the beginning (although not a lot of your payment goes toward the mortgage loan balance). In an interest-only loan, you don’t start paying down the balance until after the intro period ends (this can lead to a balloon payment down the road). And, finally, negative mortgage amortization means that your mortgage loan balance actually INCREASES. Negative mortgage amortization is generally associated with “option” home loans.

Sometimes lower payments do not mean a better mortgage loan deal in the long run. Interest only and option home loans often result in paying much more over time, even though the payments are lower initially. And they don’t allow you to build equity at a reasonable rate, either.

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negative mortgage amortization, option home loans, interest only home loan, mortgage loan balance