ADJUSTABLE-RATE (ARM) LOANS - Potential for a Comeback!
IS THERE A PLACE FOR ARM LOANS ANYMORE?
In the current bust-after-boom Real Estate Market, here in Chicago and everywhere, many point fingers at different places! Unscrupulous lenders touting misleading Adjustable Rate Mortgages - some with fast, high adjustments - have gotten much of the blame.
But might Adjustable Rate Mortgages make a bit of a comeback?
According to syndicated Real Estate Reporter Lew Sichelman in his May 1st story in the Chicago Tribune, a few more favorable types of ARM loans seem to be grouped together with those toxic, often sub-prime loans that have since gone bad. Interest-only loans. Pay-Option ARM's with negative amortization. Those one-year adjustables where one can live in a mansion on a modest salary year on, but could never afford the monthly house payments years 2-30!
In the wrong hands, these types of loan products can, and have been, quite dangerous!
But there are other, less volatile adjustable-rate products still available. Five and seven year adjustables, for example, that might serve the needs of a buyer unlikely to stay in his home for a full 30-year loan term.
Some of these products have interest rates as low as the low 4 percent range, and could indeed save some borrowers considerable money!
The best of these products cap rates reasonably - some today have a max cap of 6% - not bargain basement, but still affordable under most personal economic circumstances.
Although the entire concept of an Adjustable Rate Loan has fallen out of favor, there are some circumstances, and some home buyers, where such a loan would make sense.
But, of course, not every home buyer!
DEAN MOSS & DEAN'S TEAM CHICAGO
