6
I finally had a loan officer explain negative amortization like I was five
My banker at First Federal in Spokane spent 20 minutes last week drawing little graphs on a napkin showing how my minimum payment could actually make the loan bigger over time. She said 'think of it like a credit card where paying the minimum means the balance grows instead of shrinking.' Has anyone else had a lender break down a complex concept in a way that made you rethink your whole strategy?
3 comments
Log in to join the discussion
Log In3 Comments
bettywood8d ago
Geez, I'm still trying to figure out how my dog clippers work, so that napkin drawing would've just been modern art to me.
4
nathanj568d ago
Wait @bettywood are you saying you'd frame it? Because honestly same, I'd be lost too!
1
andrew_rodriguez6d ago
...and honestly I think getting that kind of warning is more harmful than helpful most of the time. People hear "negative amortization" and freak out, but it's really just a tool like any other. If you're in a field where your income jumps every year, like sales or medical residency, a minimum payment that grows the loan a little can make total sense. You get the house now, pay less upfront, and catch up later when you're making more. The napkin drawing just scares people into paying more than they need to right when money is tight.
2