Erin Littlefield's adjustable-rate mortgage resets in May 2008. She'll have to refinance -- and she's already dreading it. "We have a 4% interest (rate), so I know it's going to go up," said the Bryan, Texas, college English professor and first-time homeowner.
Although there's some uncertainty when it comes to her future mortgage payments, Littlefield is confronting the issue head-on: She's thinking about it now, starting to budget for increased costs before the ARM's interest rate goes up and higher payments are due.
Getting finances in order and keeping credit scores high are two keys for any homeowner contemplating refinancing. Especially for those who want to trade out of adjustable-rate loans, the ability to command the best interest-rate deals will go a long way to easing the sticker shock of higher payments.
The problem is, many Americans with mortgage rates approaching a reset will delay action until they find themselves unable to make payments, said Patrick Gavin, a certified mortgage planning specialist for The Gavin Group, part of Phoenix-based CFS Mortgage Corp.
"In America, we have an extra chromosome -- it's called procrastination," he said. "People say if I ignore the problem, I don't have to make a decision."
The best way for holders of adjustable-rate, interest-only or negative-amortization mortgages to avoid a grim situation: Refinance to a better deal on or before the adjustment date if the monthly payment is set to drastically rise.
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1 comment:
It is going to be a rough ride for those with ARMs, no question. And in my area, Boston, anyone who bought in the last few years and needs to sell soon -- no matter what kind of mortgage they have -- will be in for a similarly rocky time.
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