ARM MORTGAGES.
Devon Thorsb
If you already own a home, you likely don’t have to worry about adjustable-rate mortgages. Because chances are
you don’t have one. “The majority of mortgages that were taken out in the last couple years were 30-year fixed mortgages," says Svenja Gudell, chief economist for Zillow. "We’re talking 85 to 90 percent of originations.”
Gudell notes many homebuyers are overinsured with a 30-year fixed rate mortgage – because the chances they’ll stay in one home for 30 years are slim – but many are not willing to take the risk of facing higher rates down the line in the wake of the subprime mortgage crisis.
But if you get an ARM, you don’t need to be scared. ARMs typically have a locked interest rate between five and seven years, so your interest rate is unaffected as long as you’re in that period. But even if you are in the
floating rate part of your mortgage, Gudell and Fleming agree that rate hikes down the line will likely remain affordable.
“The increase in the mortgage rates are going to be so tame and so controlled that [homeowners] will be able to adjust over time,” Gudell says.
