Although we are certainly paying the price for the exotic loans of the past - short term mortgage loans can still be practical in today’s housing market. Whether you are considering refinancing into an ARM or making an interest-only payment - my advice is to plan carefully. If you simply are attracted to the introductory rates of ARMs or the low monthly payments, please continue reading this post as well as every financial headline you can get your hands on. The fact is, short term mortgages play an integral role to the investment markets but can still be quite dangerous in the wrong hands.

What is considered Short-term?
A mortgage that carries an adjustable rate period such as a 5/1 or 7/1 can be considered short term. Typically these types of mortgages offer significantly reduced introductory rates as well as allowing interest-only payments. As you can see, you can guess what type of market would be tempted - the subprime folk.

Short-term mortgages today
Well, in today’s market - values are dropping and rates have climbed a bit. With this in mind, savvy consumers can certainly utilize the functionality of a short-term mortgage. Again I must reiterate that the attractiveness of short-term mortgages should not be their introductory rates and interest only payments. Before exploring short-term mortgages, you should make sure you can still qualify under “traditional” guidelines and realize that a short-term mortgage is exactly that - a short-term plan.

So Who Are the “Savvy” Consumers?
In this market, the “savvy” consumer would be investors whose goals are complimented by these short-term mortgages. The introductory rates are fine because their long term goal for most of these properties are well below the 10 year mark, and thus makes no sense to lock in an interest rate for the next 30 years. And investors will see the interest-only options as a means of managing cash flow and avoid having to invest even more money into these properties. Now an investor could be anyone, but they are certainly not just your typical homeowner. The average homeowner is better off with a traditional fixed rate mortgage, as this carries greater security and caters to their long-term goal of home ownership.

The economy is tough, and markets are certainly complex - but with the right planning and research, you can see how short-term mortgages are still quite a viable option. Remember though, when considering a mortgage of any sort, make sure you speak with a qualified professional to evaluate your options and see if the loan is right for you.

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