[Travis McGee]

"or plan a sale at least 6 months in advance of the conversion date. To be safe, 9 months would be better."

What happens to RE values when millions of Americans reach that identical conclusion, and they are carrying a $250,000 morgage with zero equity, and they find out to their misery that their house is now worth only $200,000, or less?

They can't make the adjusted monthly payment. They can't come up with the $50,000 to sell the house at the new value. They can't refi into a suddenly tight loan market.

What happens next? Personal bankruptcy.

What happens nationally, when this happens to millions of Americans?

[finnman69]

What happens nationally, when this happens to millions of Americans?

Those of us on the sideline get in.

[Covenantor]

So why bother with the ARM? This is the key: The minimum payment today on a $200,000 option ARM would be only $678, a little more than half the cost on a 30-year, fixed-rate loan. On that $200,000 loan, a 30-year fixed would be $1,248 per month in principal and interest. With the option ARM, there are three other payment choices: $958, $1,167 or $1,661.

The $678 payment doesn't even cover all the interest, Bangasser acknowledged.

"Well, Mr. & Mrs. Doe, you don't actually have any equity."

So clarify this for me:

Property value has increased at double digit rates for 2 to 3 yrs
Little or negative equity built up
Refinance based on new appraisal of house at current market value
Ship of fools sailing towards the horizon. Yes?

I wonder how many chose the minimal payment because they anticipated the hyper growth in housing cost. I'm guessing the same folk that have problems with all of their spending; cars, credit cards, etc.

Please add me to your ping list.