ARM’s to Reset
December 3, 2007
Homeowners who have mortgages that are in the adjustable rate mortgage category would do well to pay close attention to the details of their loan. Over the next year and half, many of these ARM’s are due to reset to higher rates, and many homeowners may be caught off guard.
ARM’s are those mortgage loans with payments based on various indexes that adjust from time to time. The payment due each month may go up by several times over the life of the loan.
According to Allen Fishbein, director of housing and credit policy at the Consumer Federation of America, “We’ve been recommending for a long time that people pull out their mortgage-loan documents so that they really understand the terms.”
Even with today’s housing and mortgage woes, many homeowners who have ARM’s do not know when their payments will reset, what the new rates will be, or whether they face prepayment penalties should they be able to pay the loan off early. All of these can lead homeowners into deep financial problems.
Some mortgage lenders are beginning to notify homeowners about resets, but consumers should not rely on this as their only means of information. The best course of action is to get loan papers out and to examine them yourself.
Homeowners should study the timetable for resets and should look at what the new rates will be when they kick in. Once they know what will happen to them, they can begin to make plans to handle the new payment amounts.