What Is An ARM?

One of the most popular and controversial types of mortgages over the last 10 years has been the Adjustable Rate Mortgage (ARM).

This type of mortgage is seemingly ideal since it enables you to lock in a low mortgage interest rate for about 5 years but the catch is that your mortgage payment could increase by a lot when mortgage interest rates go up.

Housing Crisis  

Although they are regaining in popularity across the United States, adjustable rate mortgages have been cited as one of the main things which contributed to the recent housing crisis from 2007-2010.

Many homeowners were unable to pay their mortgage payments each month when their mortgage interest rates increased and this drove some home owners to short sale, bankruptcy and foreclosure.

Use Caution

If you’re considering an ARM make sure you use caution and understand all of the pitfalls or potential problems which could arise BEFORE you sign up for this type of mortgage loan.

One helpful thing to do when considering signing up for an adjustable rate mortgage loan is to know what your mortgage payment “could be” when mortgage interest rates increase.

If you know you will be unable to make your mortgage payment when mortgage interest rates increase then you SHOULD NOT sign up for the Adjustable Rate Mortgage loan.

Some homeowners in the past made the mistake of thinking that they could just refinance their Adjustable Rate Mortgage before the rate increased but the reality is that sometimes conditions do apply so it’s best to ask questions and consider all possibilities before choosing this type of mortgage loan.

For more information about Adjustable Rate Mortgage loans, or to view the latest Orange County homes for sale, contact Fred Sed & Associates today by calling us at (949) 272-0125.