Has Your Adjustable Rate Mortgage Become A Gamble

Has Your Adjustable Rate Mortgage Become a​ Gamble?
Three or​ four years ago,​ interest rates on​ home loans dropped to​ levels not seen since the​ 1960's .​
Millions of​ Americans took advantage of​ the​ favorable rates,​ which bottomed out near 5% for fixed rate,​ 30-year loans .​
For adjustable rate mortgages,​ they rates were even lower .​
Many buyers passed on​ the​ opportunity to​ lock in​ at​ fixed rates and gambled on​ the​ lower payments afforded by adjustable rate loans in​ order to​ buy either larger or​ more expensive homes .​
That worked out fine at​ the​ time,​ as​ the​ rates kept the​ monthly payments affordable .​
Unfortunately,​ the​ sixteen increases in​ the​ Federal interest rates since 2004 are about to​ have a​ dramatic effect on​ those buyers,​ many of​ whom many find out that they can no longer afford to​ pay for the​ homes in​ which they live.
Many adjustable rate loans are set up in​ such a​ way that the​ interest rate is​ fixed for the​ first three years of​ the​ loan's repayment schedule .​
After that,​ the​ interest rate adjusts regularly,​ based upon prevailing market rates .​
For the​ millions of​ homeowners who gambled and took out these loans in​ 2003,​ the​ Big Adjustment is​ going to​ come soon,​ and it​ isn't going to​ be pretty .​
as​ the​ rates adjust to​ current rates from the​ low rates of​ 2003,​ many homeowners are going to​ be shocked to​ see that their monthly payments rise by as​ much as​ 50% .​
Some will be fine with that,​ having anticipated this increase for some time .​
Others will suddenly find themselves unable to​ pay for a​ house that they have long thought they could afford .​
This will undoubtedly lead to​ an​ increase in​ the​ foreclosure rate,​ which is​ already some 60% above the​ rate of​ last year .​
in​ Michigan,​ the​ rate is​ up by 90% over last year,​ as​ hundreds of​ owners have walked away from their home loans.
What can you​ do if​ you​ have an​ adjustable rate loan that is​ about to​ become unaffordable and may yet become even more so? Your best bet may be to​ refinance and take out a​ 15 or​ 30-year,​ fixed-rate loan .​
the​ benefit of​ doing so is​ the​ security that comes with knowing that your payment will remain stable over a​ long period of​ time,​ no matter what happens to​ the​ interest rates in​ the​ marketplace .​
If you​ cannot afford your loan now and refinancing with a​ fixed-rate loan will still leave the​ payments unaffordable,​ you​ may have no choice but to​ sell the​ property and move to​ something smaller and/or less expensive .​
you​ will not be alone.
Has Your Adjustable Rate Mortgage Become A Gamble Has Your Adjustable Rate Mortgage Become A Gamble Reviewed by Henda Yesti on July 01, 2018 Rating: 5

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