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Refinance Purchase Home Equity

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Are Low Mortgage Rates Placing ARM Loans I Danger?

By Ann White

Low mortgage rates are helping to eliminate high risk adjustable rate mortgages or ARM’s. Adjustable rate mortgages are believed to be one of the main reasons that there has been such a high foreclosure rate in the recent future. ARM’s were often used as a way for people with low down payments or less than perfect credit to purchase a home. Now, low mortgage rates are allowing people, who otherwise couldn’t afford a home, lock into a standard mortgage. This lock in of rates will allow the buyer to control what their mortgage rate is and keep control of their mortgage payments.

What Exactly Does An Adjustable Rate Mortgage Do That Makes It So Risky?

Adjustable rate mortgages change as interest rates change. People who believed they have secured a low mortgage rate often find that several months down the road the interest has increased so dramatically that they can no longer afford the mortgage payments. While these loans have a lifetime cap on the amount they can increase, on average an ARM increases about 3% a year. Over time this can add up to several thousands of dollars a year.

Will The Mortgage Rate Continue To Stay So Low?

There is no guarantee how low mortgage rates will drop or for how long they will stay low. Time is of the essence when it comes to mortgages. If you find a mortgage rate that is very good, lock into it and make your purchase. In the current market, with rates so low and home prices even lower, you will be able to secure a deal of a lifetime. This also applies to anyone wishing to refinance their current mortgage. You can receive very low rates if you apply to refinance now.

Related posts:

1. Is There A Cap On How High Mortgage Interest Rates Can Go?
2. Why Are Adjustable Mortgage Rate Loans Higher Priced?
3. Are There Mortgage Loans That Do Not Require A Credit Check?
4. Current Mortgage Rates-What Can I Expect?
5. How Good Loans Become Bad – 30 Year Fixed Mortgage Rates?