Watch Out For Popping Interest Rates

The common perception is the current mortgage loan crisis is due to the subprime market. This is certainly true, but there is an additional problem facing us. It has to do with hybrid and adjustable mortgage loans that resetting. These loans are allowed to have the interest rate reset by the lender after an initial teaser period. This teaser period is usually one to two years. Once that period drops, the rate can go up 1 to 3 percent. This results in a shocking increase in monthly mortgage payment amounts and puts a massive strain on your cash flow. You can refinance such loans, but most people put little or nothing down on their homes and have no equity with which to refinance. Foreclosure and short sales are their only option. If you are buying a home now, don’t fall into the same trap. Figure out what you can comfortably afford and go with it. Don’t squeak into something today that you can’t pay for in a couple of years.