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Flexible Payment Mortgages Ease Budget Pinch
by Joe Taylor Jr.
CMR Columnist
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One of the most complex nontraditional mortgage now available on the adjustable-rate menu is the flexible payment adjustable rate mortgage. While many homeowners have used the FPARM as a ticket to a new home, professionals are cautioning buyers to look at the long-term before signing on. In California, recent reports show that as much as 70% of homeowners in some counties have bought their property with ARMs. They also note that more and more people are struggling to make inflating payments.
A difficult market even with the housing "bust."
The astronomical housing market in California has finally slowed and appreciation rates are returning to manageable single-point increases. The bad news: real estate still is so pricy in California that many middle-class families cant afford a house with a traditional mortgage.
Many have turned to flexible payment mortgages, which are attractive because of their initial low payments. The initial mortgage payment is especially low, sometimes with an interest rate of only 1.25%, but the payment will increase significantly after that.
Pull out your mortgage payment calculator.
Flexible payment mortgages may be some of the most confusing of the adjustable-rate options because the mortgage payments change so frequently. Be sure to sit down with a lender and a mortgage payment calculator and work out what your payments will be over the next 30 years.
Making a wise mortgage decision involves avoiding being shocked at how much your payment increases over the life of a mortgage. Calculating payment increases before committing to the mortgage will determine whether a flexible payment mortgage is good for you in the long term.
Sources:
Common Dreams Newswire
Jackson Hole Star Tribune
Mortgage Professor
Yahoo Finance
About the Author
Joe Taylor Jr. coaches musicians, entrepreneurs, and other adults that want to shift their careers. He holds a Bachelor of Science in Communications from Ithaca College.
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