Traditionally, 30 Year, fixed rate mortgages were established after the depression to help America establish home ownership. The 30 years were based on the average age of retirement and employment history. The average American retired at the age of 60 with a fixed income pension. The timing of the mortgage payoff coincided with retirement. Because modern employment, retirement savings, length of ownership and cost of living has changed drastically since the establishment of fixed rate mortgages, modern mortgages such as adjustable rate mortgages or hybrids allow Americans to strategize and achieve home ownership in a much changing environment.

When you look at the average time a person has their mortgage in place before refinancing or selling the home, the 30 year fixed is not always the best choice. A person needs to take into consideration serveral factors such as how long before they move up or move down and length of time before needing to refinance for college funds etc... when looking at what program is best suited or their situation. A good mortgage broker will make sure to ask all the pertanant questions before quoted a home loan.

Often time a lender will allow the borrower the luxury of paying interest only payments for a certain amount of time. At the end of the Interest Only period, the lender will adjust the monthly payment so as to still have the mortgage paid off in 30 years. This allows those home buyers who are just squeezing into a higher priced house to easily afford it. Usually, at the end of the interest only period, inflation has caught up and the new "higher" payment really isn't higher at all.

Although still very popular, in recent years the 30 year fixed has given way to a number of Adjustable Rate Mortgage loans or ARMs as they are known. The ARMs offer the borrower greater payment flexability, at least for the short term.

Negative Amortization (called "Neg-Am") - Occurs when your monthly mortgage payments submitted are not sufficient to pay all interest and principal due on the loan. The unpaid interest is added to the unpaid balance of the mortgage. It could be considered borrowing equity from yourself. The period of time the neg-am is applicable is usually limited on each mortgage.

Currently the most common form of negative amortization loan is the popular Option ARM. Start rates are usually between 1-2% and that is what your payment is calculated off of while your actual rate consists of a margin and an index which is higher than the 1-2% start rate. When you make the minimum payment it is less than the interest only payment so the excess is added to your loan amount and this is what is called negative amortization.

Mortgages with Negative Amortization feature often have the lowest monthly payments. This type of mortgages is ideal for real estate investors because with a low monthly mortgage payment, investors are more likely to see monthly cash inflow with the same amount of rental income. For investors, a loan structure with cash deficits is undesirable because it makes owning property a financial burden.