Adjustable rates are bad for houses
I always knew adjustable rates are a bad thing, when it come to credit cards it’s not good, and when it comes to the payments on your home, it can be a terrible thing. I talked to Betty today and she was telling me that her house payment went up from $800 a month to $1200 a month without any notice. She’s a busy gal and doesn’t keep up with the financial market news, so she was shocked and ill prepared for the rate hike.
I had not idea she had gotten into an adjustable rate mortgage, I had thought that he house payment was the result of the good rates that were available, and why she chose adjustable or ARM when the regular rates were so good, I have no idea.
I had always thought that it is acceptable to have an adjustable rate with short term credit like credit cards, because you should always have enough money to pay those off quickly if the rate goes sky high, but when it comes to a mortgage on your home, most people don’t have enough money to just pay it off in full if the rate goes up.
Now my friend Joe got an ARM on his winter home, but he’s got the money to pay it off in full anytime he wants, plus he has the credit and resources to refinance his vacation homes quickly. I do not recommend that most people choose that route, and the fact that so many did choose that, along with the sluggish economy, higher prices for staple items, and lack of raises going around, it’s leading the country and really the whole world into tough times.