Adjustable Mortgages Can Burn Owners

\r\nPrevious years have yielded housing booms for the mortgage industry, which have since faded and cooled. But a hurtful reminder of that time may be coming for homeowners who chose to take out an adjustable rate mortgage during the real estate frenzy of 2002-2004. Adjustable mortgages normally have a fixed rate introductory period of one, two, three or five years – making 2006 a time for homeowners rates to adjust.\r\n

The payment shock of going from a fixed term to an adjustable term may be too much for many homeowners. A typical adjustable mortgage had a fixed rate of around 5.00%, with a margin of 3.00. That means that, as the fixed period ends, a homeowner’s new rate could be over 8.00%, the difference of about $1,000 a month for a $250,000 mortgage. Fixed rate mortgages have declined in the past few months, so many borrowers are choosing to refinance into a fixed rate mortgage being once bitten. Others are selling or, worse, foreclosing, their dream homes.\r\n