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Two Bad Reasons To Choose An Adjustable-Rate Mortgage And One Good One


Adjustable-rate mortgages have a bad reputation these days; many members of the new generation of first-time home buyers first heard of adjustable-rate mortgages in the context of the housing market crash of 2008, a financial crisis which cast a shadow over their youth.  Blaming the entire financial crisis of 2008 on adjustable-rate mortgages is an oversimplification of the problem.  Because their interest rates are almost guaranteed to change, but it is difficult to tell how much your monthly mortgage payment will increase (or decrease) with each adjustment, adjustable-rate mortgages are, by nature, riskier than fixed-rate mortgages.  In general, you should not choose an adjustable-rate mortgage if your ability to keep up with the payments as they increase is contingent on your fortunes improving in the future.  If you are struggling to keep up with the payments on your adjustable-rate mortgage and the lender is threatening foreclosure, contact a Philadelphia mortgage foreclosure lawyer.

You Plan to Sell the House After a Few Years

For a certain generation of Americans, buying a starter home with the intention of selling it a few years later was a key component of the American dream.  Making a major purchase, such as a house or condo, for the purpose of reselling it, is riskier than it sounds, though.  The housing market fluctuates all the time; selling a house is hard enough even when you can live without the income you would get from the sale.  Don’t make plans that can only come to fruition if things go your way.

You Expect the Interest Rate to Decrease

What interest rates will be several years in the future is a matter of pure speculation.  If the interest rates get lower after you sign off on your fixed-rate mortgage loan, you can always refinance the loan.  This is probably a safer bet, anyway, because then the rates will stay at the low level, instead of continuing to fluctuate, like they do with adjustable-rate mortgages.

You Want to Make a Big Dent in the Principal Right Now

There is, however, a silver lining to adjustable-rate mortgages where the interest rate is guaranteed to stay low at least for a few months or a year.  You can use this opportunity to pay down as much of the principal as you can.  This way, when the interest rates increase, you will be paying interest on a lower principal balance, which means that your monthly payment will not be astronomical.  An adjustable-rate mortgage might be right for you if, for example, you have just started a lucrative job.  You can be confident of your salary for the next year (or longer, depending on your work contract), and paying down the principal of your mortgage while the interest rates are temporarily low could be the next best thing to making a bigger down payment.

Contact Us Today for Help

A Philadelphia mortgage foreclosure attorney can help you if you took out a home mortgage with the best of intentions, but it has become an albatross around your neck.  Contact Louis S. Schwartz at CONSUMERLAWPA.com to set up a free, confidential consultation.



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