The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: TheStockFairy who wrote (18848)	3/23/2004 1:14:21 PM
From: Tradelite	Read Replies (1) of 306849

A 3-year arm generally stays at the opening rate for the first three years and moves up from there only as much as the market interest rate rises, up to a maximum of 2 percent increase per year. (Most ARMS have 2-percent annual caps on rate increases after the initial 1, 3, 5, 7, or 10-year period.) Usually, there's also a lifetime cap on how high an ARM can go--so people should know and plan ahead of time what they'll do if the maximum rate is reached. If they can find a better rate or loan program at that time, they can always refinance--or sell. I've always liked the relative stability and security of the 5, 7 or 10-year arms. Most people are going to move by that time anyway. Can't see quite as much doom ahead for homeowners as Tommaso does. For one thing, anyone who gets an ARM at today's low rates is only looking at a maximum increase to around 5 or maybe 6 percent annual interest if rates rise sharply. Most likely, rates won't rise sharply, and the homeowner with an ARM will only see a minor increase in payments--offset somewhat by being able to take a higher mortgage interest deduction on income tax.

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