Rates on ARMs expected to jump
Some local homeowners might be in trouble in the coming months when the interest rates on their [tag]Adjustable Rate Mortgages[/tag] (ARMs) are expected to jump.
Many people are highly leveraged, he said, meaning they bought their homes with little money down and may have low initial rates on their Adjustable Rate Mortgages (ARMs).As Silva puts it, “The homeowners most at risk of foreclosure are those who bought more home than they could afford.â€A homeowner with an ARM, Brady said, initially pays much lower interest for a few years than the going rate for a 30-year loan. However, the flip side of the coin is that sooner or later the homeowner must get a new loan or pay interest rates several points higher than his or her initial rate. Someone with an ARM may initially pay $1,700 a month on a mortgage, but when the ARM interest rate balloons, the homeowner could end up paying $3,000 to 3,200 a month.