Adjustable rate mortgages?

Question

When shopping for my mortgage three years ago i had two options, the classic 30 year fixed or the gimmick hot and new adjustable rate mortgage. I went with the traditional fixed. Now all you read about is how all these people got a ton more house than they need and now they are mortgage broke or are losing their homes because the rate is adjusting up. Am i the only one out there who saw this coming and dont feel sorry for the fry cook in the 250,000 mansion who now cannot afford it?

Answer 1

No you aren't the only one, instead you are in the majority who bought their house with their eyes open. Because we had the sense to pay a little more a month we are better off and not in crisis, thus not worth mentioning on the news.

Answer 2

First of all the Adjustable rate mortgage is not new and definately not a gimmick. They have been around for more than 40 years. New hardly!!!

Each borrower is a different case and have different options, there are a lot of borrowers that are not in foreclosure nor having financial difficulties that selected the adjustable mortgage that fitted their needs at the time.

Some even refinanced and now have what you consider a the traditional 30 yr fixed. Some refinanced to another adjustable.

Financial planning now mostly determine the type financing you should use in determining the type of loan you select.

I have successfully used both the adjustable as well as the traditional 30 yr fixed to my advantage.

On some investment properties I have used an adjustable rate to get a lower monthly mortgage payment so I could realize a positive cash flow immediately while awaiting the appreciation of the inestment property.

Now depending on the circumstances I will refinace into another adjusable or a fixed rate.

I hope you realize that there are now a 10-20 and 15 year fixed rates also, you can pay this mortgage off earlier and erect your white picket fence around your house.

Todays real estate market is a lot different and offer a lot more options.

Some people live in a state where the minimum price of a house is what the maximum cost of house is in others thus need a tool so they can own a home thus not over extending themselves as you indicate.

The next time I drive up to your window I want a coke with my fries and burger.

I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 3

You were given the choice because you qualified for both, didn't you? Congratulations on your great credit rating and income level.

There are folks out there who wanted the American Dream. They could only qualify for the A.R.M. Now its time for the A.R.M. to re-adjust.

There are a few companies who are working with the "fry cook", doing their best to make a not-so-good situation a lot better.

BUT - here's THE CATCH: that "fry cook" MUST communicate with the mortgage company. There's no help when that "fry cook" puts the head in the sand and ignores everything and everyone.

Thanks for asking your Q! I hope you can see things from another perspective.

VTY,
Ron Berue
Yes, that is my real last name!

Answer 4

The easy answer is pay what is reasonable to pay. You shouldnt choose an ARM rate unless you arent going to refi out before the fixed period ends or plan to sell. The average length of any note held is 7.4 years according to Fannie Mae, so its perfectly acceptable to offer half that as a suggested way of purchasing before you have the equity to invest ten to twenty percent of your purchase price.

Answer 5

Well it's an unfortunate situation for a lot of people who were in the subprime field.

..but some of us just happen to be making a lot of money of bets that the subprime rates would fail..

that's just life i guess

Answer 6

at about the same time, I noticed that rents were a lot cheaper than mortgage payments and so we rented a house instead of buying one.

my rent is still lower than mortgage payments ... and by quite a bit.

Answer 7

wow, pat yourself on the back for being soooo smart.

Answer 8

no