Are You In Over Your Head?

Interest-only adjustable-rate mortgages have driven much of the buying activity over the last several years. Combined with the declining market, you may find that you owe more than your property is worth. Approximately 9 million adjustable-rate mortgages (ARMs) will readjust next year and many owners will be caught in the squeeze of having higher payments and no way to pay for them.

In 2001, only 2 percent of the ARMs were interest-only, while today’s figure is more than 35 percent. If your property value has decreased and you haven’t paid any principal, you may be upside down by thousands of dollars. If your ARM adjusts, you can’t afford your payments and you’re upside down, you may be closer to facing foreclosure than you may think.

Over 25% of all loans in America in the 4th quarter of 2005 were payment-option negative ammortization ARMs. This loan program currently has the highest rate of default and some (honest) lenders will steer consumers away from it even though the company they work with offers it.

It’s not just about what your monthly payment will be next month or 6 months from now. When assessing your financing options, make sure that you work with a reputable and experienced lender who is looking out for your best interests so that you don’t get in over your head.