Has Your Adjustable Rate Mortgage Become a Gamble

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Has Your Adjustable Rate Mortgage Turned into a Gamble?


Overview:
Recent interest rate hikes have impacted millions of homeowners with adjustable-rate mortgages (ARMs). Those who opted for ARMs a few years ago to afford pricier homes are now facing significant payment increases, potentially stretching their budgets beyond manageability.

Key Insights:
Interest rates for home loans reached historic lows three to four years ago. Fixed-rate, 30-year loans dipped near 5%, while ARMs had even lower rates. Many buyers chose ARMs to keep payments manageable and buy larger or more expensive homes. However, following sixteen Federal interest rate hikes since 2004, many homeowners may soon find themselves unable to keep up with their mortgage payments.

The Situation:
Adjustable-rate loans often feature a fixed interest rate for the initial three years. After this period, the rate adjusts based on current market conditions. Homeowners with ARMs from 2003 are now facing significant adjustments. As rates align with today's higher market values, monthly payments could increase by up to 50%. While some anticipated this change, others might struggle to afford their homes, contributing to a foreclosure rate that has increased by 60% from last year?"90% in places like Michigan, where many have abandoned their loans.

What Can You Do?
If your adjustable-rate mortgage is becoming unmanageable, refinancing to a 15 or 30-year fixed-rate loan could be a wise choice. The stability of fixed payments provides long-term security, regardless of market fluctuations. However, if refinancing doesn’t alleviate the financial strain, downsizing to a more affordable property might be necessary. Unfortunately, you won't be alone in this predicament.

Keywords:
Home equity loan, line of credit, second mortgage, tax deductible, debt consolidation, home appraisal, reverse mortgage, real estate investment, credit repair.

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