Adjustable Rate Mortgages

Are adjustable rate mortgages (ARMs) big fat time bombs? An article at ABC News runs the scary headline: Foreclosures May Jump As ARMs Reset.” It’s a sobering thought. With the rise in interest rates, the monthly payments on adjustable rate mortgages are on the way up, with no end in sight. Imagine the cost of your mortgage rising by 33% in just half a year’s time …

Owning a home isn’t just part and parcel of the American Dream. It’s core to the financial and mental well-being of folks around the globe. But when you’re stuck with an adjustable rate mortgage and interest rates rise as the value of your house drops simultaneously, it can seem like there’s no getting out.

Forget about buying that new PC or big screen TV with your spare change … if you’re stuck with an adjustable rate mortgage, those increased mortgage payments will eat up all your available cash in the wink of an eye.

Check those rates. Do Not Pass Go. Insert Pac Man death sound.

The upside of this phenomena is that when someone is less fortunate, others profit. In times like this, the properties lost to foreclosure (or lost just prior to foreclosure) tend to rise. As cash-strapped folks are squeezed out of their homes, others are able to buy those houses at drastically reduced prices.

The line from Shakespeare’s Hamlet rings true: “Neither a borrower nor a lender be” …