In your case, made good sense. But most of the cases *I* see are not the same. They are cases where people had teaser rates of 4-5% and then the small print is that their adjustment was to 8% over prime with a minimum of 14% or even higher - mortgages that they either didn't understand or were promised by brokers would never happen because they would be able to refinance before the new rate set in 2 years down the road - unenforceable promises, of course.
My home equity loan is at a delightfully low rate right now, but believe me when I tell you that most people who got in trouble are not the kind of people who would bother to try and refinance until their feet were in the fire.
Ah... yes, I agree with you there. The "Option ARMs" that were cut, and allowed interest-only payments, or even flex payments with the interest rolling back into the principal. Those instruments should never have existed in the first place, and are pretty much the epitome of predatory lending.
But that's not what generated the buzz. In ~2007 when interest rates were spiking, there was a general flight from ARMs over a spike that lasted all of ~8 months.
I'm not saying there wasn't predatory loans out there. There absolutely were, and this is no excuse to that. But what we have here is yet another example of media hype costing a lot of people a lot of money, and exacerbating a problem that probably didn't have to be as bad as it was.
Awesome rate! Where are you getting the average mortgage amount? It must be a heck of a lot higher than what I thought to swing that much with 1%. (or at least way the heck higher than my mortgage!)
You're right -- I somehow multiplied by 2 somewhere along the line. That was sort of a back-of-napkin calculation. The median US home value is $167,500. The median US mortgage is $1295/month. (According to the Census bureau.)
So, by that, a 1% swing (from 6.5% to 5.5%, for instance) would be $110 in savings.
We had a similar issue and had a 5-year ARM which became variable last year. Since we were moving, and interest rates were so low, we said "Heck, no!" to refinancing, and are doing just fine. :) Now, this next one, we may try to lock in a 30-year, because we're not planning on moving anywhere and the interest rates ARE so low...
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My home equity loan is at a delightfully low rate right now, but believe me when I tell you that most people who got in trouble are not the kind of people who would bother to try and refinance until their feet were in the fire.
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But that's not what generated the buzz. In ~2007 when interest rates were spiking, there was a general flight from ARMs over a spike that lasted all of ~8 months.
I'm not saying there wasn't predatory loans out there. There absolutely were, and this is no excuse to that. But what we have here is yet another example of media hype costing a lot of people a lot of money, and exacerbating a problem that probably didn't have to be as bad as it was.
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So, by that, a 1% swing (from 6.5% to 5.5%, for instance) would be $110 in savings.
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