Does one of the following sound familiar? See below how your payments will most likely be affected, and to learn what you can do about it.
Option #1 You had Great Credit
A couple of years ago when the lowest interest rates in history were around, someone talked you into taking an adjustable lower rate that at the time saved you a hundred bucks a month. How could you pass up interest rates like 3.5% with no points? It sounded like a great idea at the time.
Option #2 You had credit issues
Let's face it. You didn't have the best credit and you were probably just happy to be able to get a loan. Maybe you bought your first house, or you consolidated your bills....in your case the adjustable rate made sense for you because the cost of a fixed rate was hundreds of dollars more a month, or you were told the option didn't even exist for you.
Now that short term interest rate and low starting payment you had is about to change.
You have probably read articles about this in Newspapers and Magazines, and seen news stories on local, state, and national news programs on all the major networks. Here is what is about to happen to you, and below you will see how to stop it and why you need to do it soon!.
Suddenly now, your locked interest rate term is coming due, and your new payment is going to be hundreds of dollars more a month. And that's if your lucky- if your property taxes have gone up and your escrow account is short funds, now you have to make up that difference, conceivably another $100 or more a month in some situations.
If this is you, don't feel bad- it happened to millions of homeowners just like you.
To show you an example, let's assume you have a $200,000 mortgage. You pay $3000 a yr in taxes, and $600 a year in insurance. You took an interest rate of 4% on a 3 yr fixed mortgage, and now that it is coming due, it is going to go up 2% (the adjustment that most loans have as their first adjustment based on today's market rates and loan programs)
Old Mortgage Payment at 4% New Mortgage Payment at 6%
$954.83 Principal & Interest $1,199.10 P & I $250.00 Taxes $250.00 Taxes $50.00 Homeowners Insurance $50.00 Homeowners Insurance $1,254.83 Old Payment $1,499.10 New Payment
That's $244.27 a month more!!! Over the next 1 yr, you are paying $2,931.24 more on your mortgage than before the adjustment, not counting any increase in your taxes or homeowners insurance.
And that's not all! Do you know the terms of your adjustable rate mortgage? Most allow an increase every 6 months to 1 year of up to 2%, most of the time up to a maximum of 5-6% higher than your rate was before any adjustments. If rates keep climbing (and coming off the 30 yr lows, what are the chances they will do anything but?) if your loan allows for a 6% increase on $200,000, that could be up to $730 more a month than you started with over the following 2 years.
$730 a month X 12 months? $8,760 more a year than what you started at.
It's time to stop the madness!!!!! That additional money should be staying in your pocket, or at least be applied towards your loan principal.
It's time to lock in your interest rate and get away from the trouble that adjustable rates can cause.
Why you need to do it now
Over approximately the last 2 years, adjustable rate indexes (the number that your loan is tied to, like the prime rate, Treasury Bill, LIBOR index) have gone way up...some as much as 4 1/4% at the time this page is being written.
30 Year fixed rates are currently only about 1% higher than they were at the time of the record low rates. From many lenders, long term (20/30/40 year) fixed rates are actually better than some of the adjustables!!!!
This is a weird time for interest rates, as normally adjustable rates represent a large rate benefit; however, since the long term fixed rates have come back down but the short term ones haven't (and actually keep increasing), there is little difference between the two! THIS WILL NOT LAST!!! At some point the market must correct itself. Don't miss the boat! Get locked on a long term interest rate while they are still low.
