Suze's advice may not be what every seller wants to hear. "You have got to lower the price of your house, depending, obviously, on where you happen to live. There are certain areas such as Seattle, it's still fine. But California, Arizona, certain other places, it is not fine," Suze says. "You have got to forget how much money you've made. You have got to—if you need to sell that house—lower the price of that house to whatever you possibly have to, to sell it."
So how is a negative amortized loan different from a fixed rate loan? "A regular mortgage payment is where you pay every month some of the principal, some interest, and hopefully it's over a 30-year period of time, could be shorter, where you have a fixed mortgage amount," Suze says. "So rather than the mortgage decreasing every year, negative amortization means your mortgage actually increases each year."
These loans are starting to cause homeowners headaches because many people didn't realize their payments would increase until it was too late. Lenders issued negative amortized loans to people who couldn't afford a regular mortgage payment. For example, if you can't pay $2,000 a month, the lender lets you pay $800 a month instead. "And they add the $1,200 that you should have been paying to the end of the mortgage," Suze says.
Those with negative amortized loans will see their payments adjust in the next few months, Suze says. "[For example], it's going to go from $1,500 to $3,000. It's going to go from $2,000 to $4,000. And their mortgage has been increasing as well," Suze says.
Even without interest-only loans, homeowners in some areas are having trouble paying a fixed rate mortgage. One audience member has a 30-year fixed rate loan but lives in Michigan, where the market has been hard-hit. She says she can barely afford her mortgage payment, and her house has been for sale for a year and a half.
"You're not going to be able to sell it for a while, I'm so sorry to say," Suze says. "Your state—in certain areas of your state—we're in trouble. There are a lot of layoffs. What makes a real estate market a good real estate market is when there are jobs to attract people. When there are no jobs to attract people, they have to leave."
Instead of selling her home, Suze suggests the woman either rent the home for the same price as her mortgage or take in a roommate. "You've made it this far. You have to have faith that you're going to make it a lot further," Suze says.