Three Quarters of Adjustable Rate Mortgage Holders Don’t Know How Much Their Payments Will Increase After ResetOctober 23rd, 2007
About $50 billion in adjustable rate mortgages reset this month, driving interest rates up for many borderline borrowers. And despite efforts to raise awareness, it doesn’t look like anyone is really prepared for what’s to come.
“I don’t know if there’s anything much [borrowers] can do,” said Keith Gumbinger of HSH Associates, a publisher of mortgage related information. “Hopefully, they’ve been prudent about preparing for it, building a nest egg or refinancing the loan.”
But most borrowers are likely to just scramble to pay the higher expenses – some of which will jump by 50 percent and come as a big surprise.
According to a survey conducted last month for the AFL-CIO by Peter D. Hart Research Associates, three quarters of borrowers have little clue about how much their payments will increase when their loans adjust. Nearly half don’t know how their loans actually reset.
“This survey shows that many homeowners simply are not prepared for the steep rise in mortgage payments that this market inflicts on ARM holders,” John Sweeney, president of the AFL-CIO, said in a press release.
When asked whether they were confident or worried about making their monthly mortgage payments over the next few years, 41 percent of homeowners whose adjustable rate mortgages (ARMs) had already reset said they were worried. Only 18 percent of pre-reset borrowers were concerned.
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