why do adjustable rates keep going UP? WHAT CAN BE DONE TO STOP THIS MESS?

Question

This ain't the LAND OF THE FREE!!! IT IS THE LAND OF DEBT!!!

Answer 1

Sell the house and buy one the right way next time. 20% down (minimum) and a fixed rate, 15 year mortgage. Spend less than you earn and get on a strict, written budget.

Answer 2

I assume you're talking about ARMs (Adjustable Rate Mortgages). They are called 'adjustable' because they will adjust after a preset period of 1 year, 5 years, 10 years or 15 years, etc. Once it is past the preset period, it adjusts to the current lending rate, which may be higher or lower.

These days, the rates are going up because the lending rate is up from the rock-bottom rates of a few years ago. A lot of people get 'suckered' into these ARMs thinking that the rates will go lower, and get the door slammed on their fingers with today's higher rates.

The best thing for you to do now, is to get into fixed-rate loans, and hope the rate is lower. Otherwise, you may have to either do a fire-sale or risk foreclosure if you cannot pay the mortgage bills. Or get another job to make ends meet. Either way, it's a difficult situation.

Yes, I agree. We have become the Land of Debt, because many people have been lured into this debt trap.

Answer 3

Instead pointing out the obvious, which you already know, ARMs are terrible loans, I will try to give you a solution.
Your interest rate will never go down. In fact it will always go up. Untill you refinance into a different loan. They are suppose to be used as temporary financing.
Anyway, what can you do?
I would suggest refinancing into a 30yr fixed mortgage with a HELOC to make up the difference. Here is the problems you may have though.
1) Your house may have devalued causing you to owe more than what it is worth
2) If you can't afford the ARM payment you probably can't afford two payments 30yr fixed and HELOC.
3) If you have been late on payments, then your credit score is getting slammed, causing you to not qualify for a better interest rate.
4) If #3 is happening you probably are running up even more unsecured debt, which will through off your debt/income ratio causing you to not be a good investment to the bank.

If any, some or all of the above are true, then you probably have to sell your house, or let it go to foreclosure. Not the advice you wanted to hear. But the upside is, if you let your house go to foreclosure, all the debt will go away with it, plus you won't be kicked out of your house for 6-8 months. Free living. Downside is you won't be able to buy another house for about 5-7 years.
You may end up deep in debt with-out a house or house payment, depending on what you can get for your house.
You may have to go to renting till you can get stuff back in order after all that.
Word to the wise, it won't get any better. Your ARM is paying for all the others how have foreclosed, so the bank has the license to rape you till you sell, refinance, or foreclose.

Don't worry though, the faster you bail, the faster you can get back on track.

Answer 4

Adjustable rate mortgages are tied to an index plus a margin. Right now, I would actually say they are heading down b/c the Fed keeps lowering rates.

Answer 5

There is a reason those rates were termed 'adjustable'. Did you actually think they would go DOWN ? I have a difficult time mustering up any levels of pity and/or sympathy for those who signed such silly loan agreements. If you didn't want an adjustable rate, you should not have agreed to one.

Answer 6

it's also not the land of the free lunch. you signed on because you thought you were cutting a fat hog. interest rates were artificially lowered during the 90's to give the false sense that nafta wouldn't hurt the economy. you fell into that trap. refinance and take your financial medicine.

Answer 7

ARM's are simply "teaser rates" to lure folks into thinking thats the best choice but people fail to understand/realize that those rates are not going to stay low.

Answer 8

we need new government leaders to drag us out of this crap