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Adjustable Rate Mortgage Problems

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The real estate boom of the last several years was escalated by the Adjustable Rate Mortgage loan.  These loans allowed many homeowners to qualify for mortgages that might not have been able to qualify otherwise.  These homeowners were able to qualify for low monthly payments at 4% interest; however, recent interest rate hikes and lender adjustments are boosting these interest rates as high as 7%.

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If you are a homeowner that took out a 15 year mortgage for $150,000 at 4% interest your monthly payment would run about $1100.  The same mortgage loan for 7% interest carries a monthly payment of $1350!  A homeowner struggling to make the monthly payment at 4% interest may find the mortgage payment at 7% completely unmanageable.

The housing marking is cooling and interest rates are rising.  This spells trouble for thousands of Americans that have trouble with their monthly mortgage payments.  According to a survey of mortgage lenders, nearly ¼ of all mortgages on the books now are adjustable rate mortgages.  Many of these loans were underwritten by sub-prime mortgage lenders to homeowners with poor credit ratings.  These are the homeowners facing foreclosure when the payments become unmanageable. Mortgage industry analysts predict the foreclosure boom will be in full swing in 2007. 

If you are one of the thousands of American homeowners tempted by the promise of low interest rates, you should refinance your Adjustable Rate Mortgage before rates rise too high.  Refinancing to a traditional, fixed rate mortgage loan gives you the safety of knowing your monthly mortgage payments will remain the same throughout the duration of the mortgage loan.  To learn more, sign up for our free guide: Five Things You Need to Know Before Refinancing Your Mortgage.

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