If you are like many home owners today, you might have an Interest Only Mortgage or Adjustable Rate Mortgage (ARM). In general, these are not bad loans but they should be considered temporary loans. This is because of the loans RECASTING. In simple terms, this means that the payment of a loan is adjusted to make sure that the loan can be paid back in full with equal payments by the end of the term of the loan, without having one large sum due at the end.
Here is an example of how this might work. If you had a $200K mortgage at an interest rate of 6.00% on a 30 year fixed loan with an interest only period of 5 years, you are looking at a 29% increase in your monthly payment, when the interest only term runs out. In addition, if your mortgage is an ARM, that payment increase could be substantially more. With the cost of living increasing almost daily, can you afford for your mortgage payment to increase by almost a third? If you feel that an increase in your mortgage payment is going to be too much for you to manage, get on the phone now. The sooner you start, the more options you have!
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