Many are sold on the 2 conservative payment options of the Option ARM. I know people who were told it’s just like a 5/1ARM or a 30 year fixed payment. You can do whatever you like pay the fully amortized payment, the interest only payment etc.

My landscaper told me he refinanced into this great loan that reduced his payment in half. He had no idea what he was getting into until he realized it was a neg am payment. Sure he thought the lower payment was great but he had no clue what the loan really was. Now he’s stuck in it for another 18 months. He was in a 30 year fixed rate at about 6% before he got this great loan that cut his payment in half. He pulled out no equity. He was done in by an unscrupulous broker.

I have another client that got laid off by Qualcomm. He had an assembly/testing job and isnt the brightest bulb in the box. He could have easily pulled out a 25K HELOC for no cost and solved all his short term problems. Instead an unscrupulous broker refied him into an Option ARM knowing full well that he was looking for work out of the area. When he sold his house 3 months later he had a $15K prepayment penalty on a loan amount under $300K.