On the Walk-Through, Damon Darlin of The New York Times is the latest voice to fret over the number of Adjustable Rate Mortgages (ARMs)that will be adjusting over the next few years. Payments that are small now will be getting massive soon. The worry, of course, is that there will be an epidemic of foreclosures.
It doesn’t seem like a source of anxiety yet, but the numbers are climbing… The economists I’ve talked to say that the bulk of adjustable-rate mortgages don’t start to trigger until next year. That’s when the nail-biting begins.
All of the talk about resetting ARMs is in my opinion another case of the media instilling unnecessary fear in the public. No doubt there will be some foreclosures as ARMs reset.
Not so fast. First, I expect there will be another boom in the mortgage refinance market as most holders of these ARM’s are savvy enough to get something with a more stable payment while they can. As rates have continued to go up on a regular and rapid basis, most of these homeowners should be (and I would bet most are) re-evaluating to determine whether or not their ARM is manageable over the next several years. If not, it may be time to refinance.
Do you have an ARM? Keep an eye on those monthly mortgage statements and the interest rate you currently pay and contact your mortgage broker/banker to discuss your options.
Whatever you do, don’t be one of the minority of ARM customers who proves the media right when your bank comes knocking at your door.
Your other option, of course, is to consider selling before your ARM adjusts to an unmanageable level. Let’s face it, even in this “cooling” market, most sellers are still selling for incredible profits. So instead of a 50% return, many of you may have to settle for 20 or 30%. Not such a bad thing if we keep everything in perspective.
Happy Memorial Day Weekend to all.
