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Chris Salese

After watching my son get out of the car with his driving instructor the other day, it made me realize that the car being used to teach him how to drive was sort of like a mortgage.

I’m sure you remember these training vehicles.

They come equipped with a passenger side extra brake mechanism, plus a few even have a secondary gas pedal or safety steering contraption as well.

And, of course, the vehicle’s captain is a certified driving educator. See, it looks like a home loan already!

Let’s keep moving here.

As with just about all motorized vehicles, the most common direction they go is forward. Some go slow, some go fast, yet ultimately, they go straight ahead.

Similar to the training vehicle, the majority of home loans out there go forward. The funny part is that you will probably never hear your neighbor or family member bragging about the forward mortgage interest rate they received because nobody says, “forward mortgage.”

I doubt you’ll find lenders advertising with statements such as “no payments on a forward mortgage” either.

Nonetheless, there’s a good chance if you own a home, with a loan on it, that you have a forward mortgage.

A forward mortgage is simply one that you plan to pay off in the future. Whether it’s a fixed or adjustable term, it’s still a debt that you owe against your home that you agree to settle at a specified time.

However, unless you can make all the scheduled amortization payments on the loan for the entire term or you are able to pay it off in a lump sum, then you will need to shift gears at some point down the road.

Many years ago, there was a lending product called an Option ARM.

This product had built in adjustable rate gears for the consumer to pull during the term of their loan.

For example, you could pay principal and interest one month, interest only the next month or make a payment that was less than the minimum amount of interest owed too.

How this was called a “forward mortgage” is mind-boggling. Unfortunately, as you know, this product was one of the main culprits of our financial market meltdown because it was intentionally misadvertised and irresponsibly guided the wrong way.

Today, there are no more Option ARM products, although there are plenty of forward mortgages with interest-only features.

This is sort of like resting in neutral. If positioned the right way, it can be very helpful.

There’s also what’s called a reverse mortgage. It is the mortgage you see frequently advertised with no payments, no rate and according to the Consumer Financial Protection Bureau “enticing images of youthful retirees on the golf course.”

If used correctly and not driven recklessly, it’s an important financial tool for many people.

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Chris Salese can be reached at or 707-363-4439. He is a licensed California mortgage lender (LO NMLS #254469 — CA-DBO #254469 Corp NMLS #1169 Equal Housing Lender.