Debt Consolidation

Is your adjustable rate mortgage (ARM) making you anxious? Are you one of the millions of people worrying about not being able to make your monthly payments if rates continue to go up? According to a recent poll, lots of homeowners - over one third – are concerned about their future because of adjustable rate mortgages.

It’s pretty easy to understand, since the great majority of people with ARMs are first time homeowners. Many are young people with less education and less income, often unmarried adults and minorities. A lot of these people, because of the record low interest rates of the boom years, were enticed into buying pricey homes they really couldn’t afford and ended up over their heads in debt.

Most of these people are now realizing that the boom years are over. Home values have flattened out or are even going down in some areas. Interest rates have been creeping up. Many of these who gambled on higher home prices and lower interest rates are now facing as much as $400 a month more in interest charges and a lot of them just can’t afford it.

If you do have adjustable rate mortgage and are concerned about your payments going up, maybe this is the time to switch to a fixed rate mortgage. Don’t wait for rates to get even higher than they are now. Sure, your monthly payment will probably go up with a fixed rate, but it probably won’t increase as much as an adjustable rate will in the future.

In contrast, if you’re just now trying to choose between an ARM and a fixed rate mortgage, take a real good look at your situation. Don’t assume that your income and home value will continue going up at a record pace. Nor should you assume that interest rates will start heading down in the near future. Do your homework and consider all options and all possible scenarios. Then make a wise decision.

Be a smart consumer and a conservative home buyer. Never jump into a home mortgage – adjustable or fixed - that’s over your head in price. It’s less stressful to be safe rather than sorry.

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