Should Chicago Homebuyers Opt For New Adjustable Rate Mortgages?
Remember last decade's adjustable-rate mortgages? You know, the subprime loans that led to millions of mortgage defaults across the country - and pretty much launched the whole recession? Well, they're back.
But this time around, lenders say they're different - and depending on your financial situation, they may be able to help you afford a home. In the past, ARMs came with risky gimmicks, like rates that adjusted every six months (seriously, how can you keep up with that?) and an option that allowed people to put off paying interest - leading to a huge bill later down the line.
Today's ARMs are far more conservative, explain Chicago bankruptcy attorneys.
In most cases, the initial interest rate is fixed for a certain period - from 5-7 years - before it begins adjusting up or down once a year towards a capped maximum. That fixed rate can be up to one-and-a-half points lower than the rate for an average fixed loan. Unlike ARMs of the past, today's loans provide the chance to save on interest for several years, without any sudden rate hikes.
Also unlike past loans, these ones aren't that easy to qualify for. While in the past, lenders would push subprime mortgages on anyone with a pulse, today you actually have to prove that you can pay not just the initial fixed rate, but also several more percentage points. Banks aren't taking any more chances.
If you can qualify for a loan, have a steady source of income, and fully understand the terms, an adjustable-rate mortgage may be able to make your home loan more affordable. Ultimately it depends on your situation and your needs. Of course, if you're drowning in debt, you may not have much of a choice over your rate - or be able to qualify for a loan, period.
If your financial past is holding your financial future hostage, bankruptcy might be able to help. By lowering debt so you can start cleaning up your finances - and your credit - bankruptcy can be the most effective way to find a fresh start. Find out if bankruptcy is right for you and your family when you try a free personal debt analysis with a Chicago bankruptcy attorney.