Mortgage problems??

[Coleroo]

Not us... we're on 30 year fixed.. they tried to stick us with an 80 / 20 balloon arm loan when we bought (3/06) and I said "nothin doin'"!!

I had a friend last year, however, who's ARM increased right after we bought ours - her payments went up over 200$ per month - unfortunately she was pregnant, just bought a new car, and was about to quit her job.

whew.

[LivingAlmostLarge]

Rebecca, one we bought a townhouse so even if we lived in our area for another 10 years we're buying a house period. I do not like living in a condo, so when we have enough money we'll be moving into a single family home. What I paid for this stupid townhouse is what more people pay for a SFH.

Second, I don't plan on ever refinancing. My rate caps at 9.25%. If it fluctuates, no problem the principal paydown helps when it re-adjusts.

Third, I hate where we live and will not live here longer than 7 years (you have to understand where we are from to really get this statement).

Fourth, if we have a job loss what difference does it make if it's a 30 year fixed or ARM? Nothing. You need to pay the mortgage either way, unless you are debt free! So an EF and large taxable savings are the only way to keep your house during a job loss.

Having an ARM does not cause you to house during a job loss. What causes it is buying too much house. If you are laid off for a year and can't pay the mortgage because you used up all your savings, explain to me how a 30 year fixed will help? Nada.

I've already run the numbers by the way at year 8, with the mortgage paydown and a maximum capped rate of 9.25%, we're looking at an increase of like $700 maximum, less if choose to pay off more. We can afford it easily on our income.

Also if we lose our job and can't afford the increased $700, explain to me how'd we afford the $2k mortgage anyway? Doesn't work either way, we need income to live period. Whether the mortgage is $2k or $3k.

People lose homes because they don't look at all factors of the equation. They don't consider can I afford the house if my rate was the maximum ARM? (yes). Can I afford the house with a fixed rate? (yes). Will I lose the house if I lose my job? (well either way I gotta pay so might as well have an EF). What is my goal? To make money or have a nice place to live? (both maybe).

Our goal in buying was to stabilize our "rent" during our time living out here. Have an awesome place to live, not move, and be able to keep our dog. We can do everything while looking at the bigger picture. We have enforced savings plan which was nice and if we had to sell we had 20% DP (over $120k) in equity to lose. I don't know what the market will be like in 2-3 more years, bad probably.

But rents here are expensive, our mortgage is $400/month more for a 3bd townhouse than our current guest will be paying to rend a 2 bd apartment. And of that payment $700/month goes to principal. So our Interest is less than his rent, not couting the tax deduction.

Hmm....nice. I don't jump lightly into investments. I also worked out many different financial scenarios excel. This is not our first Arm, nor probably will it be our last.

I don't tell people to get Arms usually because they typically haven't considered all ramifications of their actions. Also most people don't ever run the numbers on worse case scenarios.

But on a side note, did you know Canadians only have Arms? I don't see so many Canadians in foreclosure and financial trouble. My in-laws only used 5 year Arms to buy their homes, and so did all of DH's friends parents. So if Arms were so terrible why are their most commonly used product in another country? Why don't those consumers have the same problems we have here?

Is it lack of education? Is it fiscal responsibility. By the way my MIL thought we were nuts for getting a 30 year fixed on our old condo. She reamed us and said we were "wasting money".

[DebbieL]

I'm Canadian, and we do have fixed rate mortgages. Most Canadians that I know have a fixed rate mortgage (we're quite conservative on the whole). I don't have any mortgage as I refuse to participate in the ridiculous housing bubble where I live ($570K average house price in a city with average household incomes in the 60K range - ridiculous).

[LivingAlmostLarge]

Debbie, you don't do a five year arm and renegotiate with the bank? And usually length of loan is 20 years?

[disneynutt]

So is there anyone here with an ARM or interest-only mortgage that is giving them trouble, or threatens to in the near future? Or are we all too financially responsible to have gotten roped into any of those scams?

My parents are in the midst of a mortgage scam. I feel bad that I didn't pay enough attention when they were refinancing a couple of months ago. Their current mortgage is on a sliding payment scale. They make a minimum payment (well, I'm actually making the payment) for 24 months, and that payment doesn't even cover the interest on the mortgage. So, unfortunately, they are in negative amortization. I would make a higher payment, but I really can't afford it right now. The mortgage has increased almost $6,000 since their refi in May. I'm currently looking to get them into another refi through my financial advisor, but I fear it may be too soon from the last one.

They were truly duped into signing something they didn't understand at the time. And unfortunately we're all paying the price. We might have to sell the house in a year and completely downsize in order to come out on top again.

[myself]

27 months into a 15 year fixed @ 5.5%.
Well, we're doing pretty good.
In another 3 months, we'll be paying more towards principle than we are in interest.


The only way I would have got an ARM would have been if I could have paid the 15 year mortgage payment, but financed on a very low rate ARM.

And I agree with LivingAlmostLarge, that all factors have to be looked at (including term, starting rate, increase of rate, and maximum rate), when it comes to an ARM!

[Ima saver]

I just wanted to mention that I worked for a building and loan company that had savings accounts and made home mortgages only. I started there in 1977. At that time, the only home loans offered were for 20 years and the interest rate was 9%. That was 30 years ago!

[dayana]

Avoid Mortgage and Refinance Problems

Everyone has good intentions when they first take out their mortgage. The excitement of home ownership motivates the borrower to do everything they can to make the payments promptly and accurately. The lender will also work very hard with you to keep your mortgage strong since they
have more use for your money than they do your property. Despite all this, sometimes things in our lives don't go quite as we'd like. Living arrangements change, employment comes and goes, and dishonest lenders are constantly looking to make a quick dollar off a refinance. We will take a look at a few unfavorable mortgage and refinance scenarios and assess them.

Obviously you need a steady flow of cash in order to pay off a mortgage. Should you suddenly find yourself out of work, or going through a career transition, this can create havoc for your loan.

It's best to save dreams of home ownership for when you're set in a career, and your job security looks promising for the time being. This can be hard to gauge at times, but if you really dislike your job and don't see it as a long-term commitment, you definitely want to think twice about how you'll afford a mortgage.

Closely related to the above situation, changes in living situations often greatly affect finances. Someone moving out or a separation occurring almost always means less money. With one person being left to pay the bills on their own, there is a very high chance that expenses will not be able to be met. There also are the potential legal complications that unpaid bills and debts can cause. Although we have no way of knowing whether our relationships will ultimately succeed, home ownership should be saved for long-term, highly committed couples.

Some people refinance their house thinking they are saving money only to later realize that they were mistaking, or part of a scam, and now don't know how to prevent foreclosure. Refinancing should only be done if you are certain it's a good deal and that you're going to save a significant amount of money. In this case it might be better to refinance through the bank that issued you the original mortgage, since you already have a relationship with them, and hopefully they have earned your trust (On the other hand, your current lender already has your business and may be in no hurry to offer you a better rate). Keep in mind the amount of research and effort that goes into refinancing. If you're going to do that amount of work again, it's in your best interest to make sure it will pay off.

Dealing with mortgage and refinancing is not easy. You will be presented with many options and often have to take time to figure out how to get the best deal. It's important to be aware of the factors addressed above, because many people do not even consider them in the early stages of home ownership. It's important to be aware that a mortgage or a refinance lasts for a very long time, and much can change over that period. You will do yourself a big favor in the long run if you're able think ahead now.