Adjustable Rate Mortgages Fuel Foreclosures

At a time when people thought that they had a great deal on purchasing a house with an adjustable rate mortgage, their ride may soon end. As they say, "all good things come to an end", and many people may that feel that pain in their pocket books when their ARM or adjustable rate mortgage will double or even triple. One of the many factors contributing to a cooling real estate market, the owners of property that took out interest-only or payment option adjustable rate mortgage years ago may increase the numbers of foreclosures nationwide.

In recent years, lenders started to market these nontraditional ARMs when housing prices spiked in the early 2000s. The first-time buyers and other homebuyers that couldn't afford the traditional fixed-rate payments were convinced by lenders to take the adjustable rate mortgages. After the initial grace period passes for these types of loans, the monthly minimum payments are and will increase from 1 to 7 percent. In these early years, untraditional ARMs were marketed nationwide by lenders to deal with the high cost of housing and allow the first time buyer the opportunity to get into a home, when without this mortgage opportunity they would not have been able to.

So as the ride begins to end and the owners are shocked by the increase in their monthly mortgage payments, many will have to face with trying to sell their home in a real estate market that has hit rock bottom. The number of foreclosures is expected to increase due to the fact that homeowners stuck in a home they can no longer afford or even get rid of.