Adjustable Rate Mortgages – The Sad Truth
Adjustable Rate Mortgages – The Sad Truth
by Jeremy Redlinger
If you have an adjustable rate mortgage, otherwise known as an ARM, you have probably noticed more and more solicitations from mortgage brokers who want to help you get a fixed rate mortgage, especially when that rate is a month or so from adjusting. Im going to go on a limb here and guess that the mortgage brokers that are calling you really dont care about you. If they cared about you, why would they wait until a month or so to call you just because your ARM is going to adjust?
The adjustable rate mortgage is the new phenomenon for mortgage brokers and mortgage companies alike. They know that your rate is going to go up and that you will need to refinance your home loan before too long, so here they come to swoop in and be the hero. I bet that 90% of the mortgage brokers that call you were the ones putting their clients into these types of mortgages, hence the reason for them calling you and not the clients they worked with in the past.
Unfortunately schools in America do not have a standard finance class to educate our citizens about home ownership, credit cards and other financial obligations we take on as we grow. This not only allows for us to be taken advantage of but also allows so called professionals to be taken advantage of by the companies they work for. For instance, a few years ago the media and other top ranking officials in the mortgage industry were telling everybody to take an adjustable rate mortgage, but why? If you asked them back then I bet they would say because rates are low.
The truth is, typically fixed rate mortgages have a higher interest rate compared to ARMs, usually half a point to a point on your interest rate. On a $200,000 mortgage, an adjustable rate of 6.75% and a fixed rate mortgage at 7.75% amortized over 30 years have a payment difference of $136 a month. My guess is, if your debt to income ratio is to high on the fixed rate mortgage but you qualify for the adjustable rate mortgage you are looking at a home that is over your budget.
Now that you find yourself stuck in this dilemma, finding a way out is not as impossible as you think. You need to start seeking options way before your rate is going to adjust. The most common problem I see today has to deal more with credit issues rather than lack of equity. A true mortgage professional is not going to discard you just because you do not qualify for a loan today, he or she is going to work with you to solve your problem 3 months, 6 months or even 9 months in advance to prepare you for a new loan before your mortgage rate adjust.
If you start looking around for a new mortgage early enough you will be able to determine which mortgage broker really cares about you and which mortgage broker cares only about themselves. Do yourself a favor and start looking into what possibilities are available to you today so when the time comes for your adjustable rate mortgage to adjust you are prepared.
My name is Jeremy Redlinger and I have been in the mortgage industry since the age of 22. My philosophy is to cater to the needs of homeowners by education. If you enjoyed this article, you can find many more like it on just about any topic when it comes to financing a home on my website entitle Your Mortgage Matters.
Tags: Adjustable Rate Mortgages
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