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#1
12-30-2005, 12:08 PM
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Re: How much can I afford to pay in rent?
ARMs do have a lower interest rate but rates are arising and will continue to do so for the foreseeable future. The .5% difference with a ARM as compared to a fixed rate mortage will quickly disappear and your monthly mortgage payment could balloon to an ugly number.
The promblem that I have with ARMs is that people are using them because they barely have the means to afford a house. Through ARMs, people are over extending themselves and buying more then they can afford. If you are already over extended when you first buy a property, it can get really ugly when interest rates start moving in an unfavorable direction. Before you know it, your mortagage payment nearly doubles and your left unable to make payments. 
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#3
12-30-2005, 12:30 PM
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Re: How much can I afford to pay in rent?
So you dont think the possiblity of someone's mortgage doubling is not a good reason for cautioning someone against an ARM? The fact is, home buyers tend to overextend themselves. Just look at how much lenders are willing to give borrowers and you can see why this is the case. If someone is overextended on day 1 of a mortgage, what happens 1 year down the road when Mr McMansion owner doesnt get that correspnding raise in income to cover the cost of that nice, new, increased mortgage payment?
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#4
12-30-2005, 12:50 PM
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Re: How much can I afford to pay in rent?
[ QUOTE ]
So you dont think the possiblity of someone's mortgage doubling is not a good reason for cautioning someone against an ARM? The fact is, home buyers tend to overextend themselves. Just look at how much lenders are willing to give borrowers and you can see why this is the case. If someone is overextended on day 1 of a mortgage, what happens 1 year down the road when Mr McMansion owner doesnt get that correspnding raise in income to cover the cost of that nice, new, increased mortgage payment? [/ QUOTE ] Well, if the rates keep going up, and the market keeps going down, you can always refinance to a fixed rate loan before it gets too bad.
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#6
12-30-2005, 01:00 PM
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Re: How much can I afford to pay in rent?
cubsalwayslose,
Perhaps I was not clear. My statement was basically that just because a person can get themselves into trouble by buying too much house with an ARM does not necessarily mean that ARMs themselves are a bad choice. Don't get me wrong, they are here but the reason is not concerns about buying too much house. J
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#7
12-30-2005, 01:14 PM
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Re: How much can I afford to pay in rent?
Correct, ARMs are not a bad choice in all instances, especially people planning to own for a short period of time or those planning to buy when rates are dropping. Rates are currently on the rise so i think right now is not the right time to jump into one.
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#8
12-30-2005, 05:01 PM
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Re: How much can I afford to pay in rent?
[ QUOTE ]
At an additional cost, of course. One day i want to be the bank [img]/images/graemlins/smile.gif[/img] [/ QUOTE ] Yeah, but it could easily be worth it. How bout them ING flat $555 refi rates?
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