[Travis McGee]

If you have an "interest only" or other type of ARM loan, you might want to consider converting it to a fixed rate, ASAP. Don't assume that you will be able to do a quick and easy refi a few months down the road: you could wind up badly burned.

[Travis McGee]

For your possible interest.

[xrp]

I did a 5/1, but only because I'll have the balance paid off in 5 years or I'll have moved.

[Travis McGee]

It is amazing to me that people in these loans are nearly clueless as to what their loans might get reset to. Barron's loan adjusts to prime rate +2 or something like that but he "can't remember exactly what the adjustment is." Yikes that is 9.25%, on three properties! He has three 100% loans based solely on "shining credit" and someone stupid enough to make the loan. Perhaps a better way of stating it is some hedge fund or mortgage player or investor is stupid enough to take that risk for perhaps an extra 1/4 point or 1/2 point over treasuries. Is that a good deal?

I think not and I fully expect to see some hedge funds and/or leveraged reits to blow up over it too.

[Pondman88]

Yada, yada.....

I got a 3/1 Arm, 1 1/2 years ago at 3.5%.....

So I got a very low payment, I got accelerated principal payment, in year 4 it can only rise to 5.5% (still below current market rates) and in year 5, if I want to I can refi.

So no thanks, I'll keep the ARM.

[gotribe]

The old ARMs aren't the problem, it's the interest-only part that's the problem. People are "buying" homes with interest only loans but are essentially renting them.

[txzman]

It's gonna be fun watching all those folks all rushing to the door at the same time, trying to sell their homes. Gee, I wonder what's going to happen to the prices?

[shezza]

Wow, "Paying the Piper" isn't even considered when a lot of people make such enormous financial decisions.

Mortgage Banker PING, Louie

[wtc911]

Hiya...Happy New Year.

It is the adjustable part that kills these borrowers. We have a thirty year on an investment that is interest only for ten years then standard interest plus principle for the remainder. The rate stays fixed throughout and we will have the principal paid down by 75-80% by payment 121. That will leave us with 6.125 on only 20% of the original debt with the property generating 350% of the payment.

[GovernmentShrinker]

I really think that this isn't going to cause a huge problem. Most of the people dumb enough to stretch their finances to the insane lengths that the Barron-Wood couple has, are in relatively small, inexpensive homes. On top of that, most of the homes have appreciated in value signficantly since they were purchased.

Sure, some of that value will evaporate as a lot of these homes start coming onto the market, but for the lenders to get burned, the sale prices will have to go below what they were when they were purchased, which just isn't going to happen very often. The stupid home"owners" will be the ones getting burned, when the effectively 100% mortgaged homes do in fact sell for exactly what they were purchased for. Then the stupid former home"owners" will discover that they have actually been paying very high rent through these years, and have no equity whatsoever. When they hit a financial snag and lose their homes to payment defaults, the lenders will be made whole and the just-found-out-we-were-renters folks will go off and rent an inexpensive apartment.

There will be serious bubble-bursts in a handful of markets, but not nationwide.

[jpl]

I still say that if a person doesn't understand fairly simple concepts such as principal and interest, or doesn't know how to go online and look at his monthly statement, or doesn't know how to negotiate on his own behalf, he has nobody to blame but himself.

[Jhohanna]

And they say there is no such thing as a real estate bubble. You have to truly wonder how many of these people are going to default/bankrupt/foreclose, and what effect that will have on the housing industry.

I *wish* I could take out a fixed-rate for 200k. That won't even buy me a studio in San Diego. The cheapest I can find a home for is pushing $350k. *Feh* Anyone need a great systems engineer with 15 years experience in Colorado Springs?! :P

[river rat]

Thanks for the ping...I would have missed this..
NOTHING shocks me anymore - involving the stupidity of the "average citizen"...

Government Schools, together with the gradual polution of the gene pool - successfully dumbed down the population to the point that we can soon expect the election of a Hillary or someone equally unfit for office..
Look how close Gore and Kerry came...

On the debt matter -- at my age - I am fortunately in a position where I don't owe anyone any money for a longer period than my monthly credit card bill...which is paid in full each month.

My wife and I have always lived beneath our means, and I'm pleased to see that our children have seen the wisdom in that approach...

The cavalier and reckless manner in which some folks deal with their financial matters is infuriating -- because their greed and irresponsibility directly adds cost to everything I buy or pay for.

Semper Fi

[Squantos]

Casa paid for in full.....no worries here ! There is that property , school, etc tax crap that keeps popping up every year though.......:o(