Posted on 08/20/2007 9:56:04 AM PDT by Hydroshock
Yeah. Irrational fear of a floating rate debt product. ARMS can offer excellent value to those who understand them. The same people would say “Stocks are risky and should be avoided!” LOL.
Heads up taxpayers: you are going to be paying other peoples' mortgages soon!
Certainly does, but mine has an ultimate cap of 12%. Even if it didn't, my principal is low, so the buydown is appreciable. I would never have taken out this ARM if I'd been borrowing a substantially higher amount of money.
When we bought our first home our plan was to perhaps stay there for 5 years, but after 5 years, we were not ready to make the move into a new home. We finally moved 17 years later.
There is some duty of the lender to make the terms in common English perfectly clear.
If they are dealing in some language, they are equally responsible for perfect translation and clarity of those terms in whatever language.
Agreed, to a point. I would make sure I understood, and if not I would hire a lawyer to represent my family and myself.
Just when I thought I'd heard everything.
I believe that there are 2 types of ARM loans. One has a cap on interest increases. These say that the increase in interest can't exceed some fixed percentage each year. Another, nastier sort of ARM caps the increase in your payment per year. For instance, it may limit the increase in your (minimum) payments to a fixed percentage. However, it makes NO MENTION of any interest rate increases. So, if the interest rate increases at a greater rate than your payments, you go into negative amortization, meaning that every month you go further into debt.
Unfortunately, many people don't understand the difference between the 2 types of ARMs.
Mark
That’s what the bitch is about.
“I really don’t care which way the rates are going if I move anytime before then.”
Unless of course when the market tanks where you own the home. Think MI and then think of how screwed the folks with ARMs are in MI.
LOL--me!!! When we refinanced our primary mortgage with an ARM, we did so knowing that we'd have the house on the market within 18 months. One year after our refinance, our house went on the market--and it is still there, over 18 months later!
We're not screwed, though. I was very careful to make sure of what we were getting ourselves into, and that we would be able to afford the rate increases if the real estate market tanked, which it did, spectacularly.
Thank goodness you used a very reasonable approach. I’m not saying that everyone that does an ARM is “stupid.” However, it is a risky proposition for many and I think the variable of “planning to sell” a house within a couple of years is a variable that is to easily influenced by markets like what is in MI right now.
I have a friend, and fellow FReeper, that relocated out of state. He bought his house a few years ago (I think 6 years ago) for $145ish, then pulled a little equity out so that his current mortgage balance is about $152K. His vacated home is currently on the market for $138K.
The market is a mess.....let’s hope it turns around soon.
I play RB with a mortgage loan broker as of late and am making a new friend. I have been told by him that there has been terminology being used by some to make slick loans that hurt the clients.
He is a straight up person, didn’t do any, but got into a long conversation of what the problem was and what his business has been guilty of doing.
They have been trying to be slick and IMO we are going to see lots of successful lawsuits because of the slickness, in many cases it will not be due to a lack of proper vigilance by the borrowers.
Stuff has been going on based on the lecture to me.
I felt bad for people hearing about it Hydroshock.
I would never think of entering to such an important long term contract without having a lawyer I trusted look it over for me.
I think with generations of one parent households, less educated folks and being offered an opportunity to get into a house they thought they couldn’t afford... they snap at the contract.
What they are not as wise as you to figure out was that the language fooled them. They indeed could NOT afford the house they are in and for the average person the contracts are deceptive.
The whole point of straight language in contracts by law is that common folks can read simply what is going down and they shouldn’t have to find a $400 dollar an hour lawyer to look it over and dumb down for them what is happening.
This will turn on what is expected as plain language for a common person. The law requires plain language. If it is plain language for a law graduate, that might be too high of a standard to survived regarding the judicial systems and their contracts... IMO.
Going to lunch, have a great day.
In all honesty a commonly used contract like these should be written in 7th grade english so people can understand them.
How do you prove that Chevy Chase bank in fact decieved you, and you’re not just stupid?
How do you define “clear and understandable??” What you or I consider understandable might be different than someone else. You can’t idiotproof everything.
It’s a negative-amortization loan. There’s nothing wrong with it IF YOU KNOW WHAT IT IS AND HOW TO USE IT. Hint: if you have a decent net worth and wish to improve it, then this loan might be a way to go.
If you’re living paycheck to paycheck, can barely afford the “starting” payment, and have little or no cash reserves, stay away.
Oh, NOW I get the joke. LOL
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