The next step, after signing the purchase contract, was to obtain a mortgage for my condo purchase. Again, my ‘friend,’ Suzie, the real estate agent, was more than happy to bring me to her lender. (Many years later I discover that my best option would have been to get an FHA mortgage — fixed rate, with low down payment.) But I was 24 years old and it was 1985, and I didn’t know what I was doing! Suzie did!

Since John, the lender, was a friend of Suzie’s, surely he wouldn’t steer me wrong. I signed a mountain of papers, gave John all my employment and paystub info. Before long I was approved! Wow! It was exciting and scary at the same time. My monthly payment was $984. The lender said I only had to pay $684 each month! Cool! “That will really save me money,” I thought.

I went to an attorney office to complete the loan closing. Suzie was there. I got my keys — the condo was mine!! Vistas of Vienna here I come!

Six Months Later
What a nitwit! I get a notice from the lender telling me the payment is going up. My payment isn’t $684 anymore. I was getting used to that. Hmmm. The notice also shows my mortgage balance — it was more than I originally borrowed. That just doesn’t make sense.

Another Six Months Later
Second notice from the lender. The payment is going up, again! This time the loan balance is even higher. What is going on!

After several phone conversations and close reading of my loan documents, I learn that I obtained a loan with negative amortization. Those lower payments I was making each month — it wasn’t a gift. They let me pay a lower amount (essentially a lower interest rate) but it didn’t cover the amount of interest due on my loan. They added it to my outstanding principal balance. It was a 6-month, adjustable rate mortgage — meaning the payment could go up (or down) every 6 months!

Later I began making my full interest and principal payments. I didn’t want my balance owed to keep growing! It was helpful in the early years as far as my cash flow went, but it sure would have been smart to be better informed up front.