Legal Question in Banking Law in California

I have an interest only loan my mortagage has been upside down for the past 3 years in 2009 my interest rage went down from 8.25% to 6.8% which caused the mortgage payments to go down and the rate has not changed but now for July 2011 my mortgate increased by $400.00 and my mortgage co. said it is because now my payments are going towards the principal, can they do this?


Asked on 7/14/11, 12:22 pm

1 Answer from Attorneys

One would have to look at your loan documents, but chances are they can. Pure interest only loans that had to be paid off in full only at the end of the loan with a huge final payment were a rarity even in the worst of the mortgage frenzy, and they were pretty much exclusively the realm of second mortgages and "hard money" loans. It sounds like you had an option ARM, that allowed you to make a minimum interest only payment for a certain amount of time, but then had to start paying principal. I'd bet a dollar to a donut that that is what your loan documents say.

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Answered on 7/14/11, 3:05 pm


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