While this particular mortgage has its benifits (such as a lower qualifying payment and a short term fix to help you repair your credit), it does have its drawbacks.
The "fixed" portion of the term of your mortgage keeps your payments fixed; your payment will not change during this period of your loan. However, once the "fixed" term is up, you may find that it will get harder and harder to make your mortgage payments.
The adjustable period of your mortgage allows your mortgage company to raise or lower your interest rate, depending on the current market trends. Today's trends will almost guarantee that your mortgage's interest rate will go up!
While the following may seem harsh to some, it does not make it any less true. We will see in the next several months to a year an increase in the amount of homeowners in foreclosure. Many homeowners will no longer be able to afford their monthly mortgage payments. As homeowners are unable to make their payments, the mortgage companies will be reporting these late payments to the credit bureaus. Subsequently, their credit scores will drop dramatically, making it very difficult for them to qualify for a new mortgage to help lower their monthly payments. At some point, these mortgage companies will begin the foreclosure process, and many many homeowners will be forced out of their homes.
Now, you may be saying, "That won't happen to me!", but if you have an adjustable rate mortgage, then this possiblity is very great! Let me show you what I mean.
The average American homeowner holds a mortgage note with a balance of approximately $200,000.00. With an interest rate at 7% for a 30 year term, their monthly principle and interest payment is $1,330.60.
Many mortgagees have a cap of 2 to 5% during the first year of the adjustment period. Let's assume that the mortgage described above has an initial adjustment of 2%. Now this homowner is paying 9% interest on the same $200,000.00. Their new monthly payment after the interest hike is now $1,609.25. That's an increase of $278.65! Each month they now have to budget for this increase!
I am sure you can see how they would find it difficult to continue to make their mortgage payments on time. What's worse, many loans adjust several times a year, resulting in an even further increases that make making those payments on time even more difficult!
As they fall behind on their payments, their credit scores drop, and they will find it very difficult to find financing to reduce their payments!
Don't let this happen to you!
Spend 5 minutes with me and see how I can get you out of this adjustable mortgage and into a new, lower, Fixed Rate Mortgage!
Call me at 1-866-788-2500 ext 231
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