Thursday, November 02, 2006

Adjustable Rate Mortgage holders may find themselves “Upside Down” in the Massachusetts housing market.

As the real estate market struggles to regain its footing, 24% of home buyers who bought during the peak years of the market using Adjustable Rate Mortgages are finding themselves facing payments they will not be able afford. ARM's escalated more rapidly than fixed rate mortgages, and in many cases it was the first time home buyer who was foolishly beguiled into overextending themselves using ARM's to get into the home they wanted. They were able to afford more home than they really needed, instead of a comfortably affordable starter home that they could use as a stepping stone in the future. Many of these buyers will not be able to refinance and convert to fixed rate mortgages. Because they financed most if not all of their purchase, they remain blindly optimistic the market will turn around sooner rather than later if they can just hang on. However, they may find themselves in an “upside down” equity position with the value of their investment lower than their mortgage.

To learn more, read these two Boston Herald articles:
Poll: A third of adjustable-rate mortgage holders worried about payments if rates go up

Housing market ‘upside down’ : More homes selling below purchase price


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