Adjustable Mortgages Can Burn Owners

Looking back on the past few years of the mortgage industry, now is a time when some homeowners will feel the pinch of an earlier decision. The appeal of an adjustable rate mortgage can slowly fade as time passes.\r\n

\r\nPrevious years have yielded housing booms for the mortgage industry, which have since faded and cooled. But a hurtful reminder of that time may be coming for homeowners who chose to take out an adjustable rate mortgage during the real estate frenzy of 2002-2004. Adjustable mortgages normally have a fixed rate introductory period of one, two, three or five years � making 2006 a time for homeowners rates to adjust.\r\n

The payment shock of going from a fixed term to an adjustable term may be too much for many homeowners. A typical adjustable mortgage had a fixed rate of around 5.00%, with a margin of 3.00. That means that, as the fixed period ends, a homeowner�s new rate could be over 8.00%, the difference of about $1,000 a month for a $250,000 mortgage. Fixed rate mortgages have declined in the past few months, so many borrowers are choosing to refinance into a fixed rate mortgage being once bitten. Others are selling or, worse, foreclosing, their dream homes.\r\n