Borrowers Should Think Twice About Adjustable-Rate Mortgages as Interest Rates Rise

Borrowers Should Think Twice About Adjustable-Rate Mortgages as Interest Rates Rise

PRINCETON, N.J., Dec. 14 /PRNewswire/ -- Borrowers who opted for adjustable-rate mortgages (ARMs) should reassess their situation in the wake of rising interest rates, says RealEstateJournal.com, The Wall Street Journal's guide to property.

Short-term ARMs have grown in popularity, particularly with borrowers looking to keep payments low in the face of rising home prices. But rates on these loans have climbed, as the Federal Reserve has raised short-term interest rates four times this year.

The rate shift also has taken away some of the luster from hybrid ARMs. Rates on hybrid ARMs that are fixed for the first five years now average just 0.84 percentage point less than rates on 30-year fixed-rate mortgages, according to HSH.

"The gap between long- and short-term rates has narrowed, making even hybrid ARMs, which are fixed for an initial period, not as good a deal as they used to be," says Valerie Patterson, senior editor, RealEstateJournal.com. "Now is a good time for homeowners with adjustable rates to consider refinancing with a fixed-rate mortgage."

Whether a switch makes sense depends in part on how long borrowers plan to remain in their home and the cost of refinancing, says RealEstateJournal.com.

RealEstate Journal.com describes some popular mortgage options:

-- Fixed-Rate Mortgages: Payments remain the same for the life of the
loan. They are predictable and remain unaffected by interest-rate
changes and inflation.

-- Adjustable-Rate Mortgages (ARMs): Offers lower initial rates.
Payments increase or decrease on a regular schedule with changes in
interest rates; subject to limits.

-- Balloon Mortgage: Offers very low rates for an initial period of time.
When time has elapsed, the balance is due or refinanced.



For more real-estate guidance and advice, visit http://www.realestatejournal.com/ .

About RealEstateJournal.com

RealEstateJournal.com, The Wall Street Journal Guide to Property, is the Internet's premier site for people seeking real estate guidance for both commercial and residential properties.

About Dow Jones & Company

Dow Jones (NYSE: DJ; http://www.dowjones.com/ ) publishes the global Wall Street Journal with its international and online editions; Barron's; the Far Eastern Economic Review; Dow Jones Newswires and Indexes; and Ottaway newspapers. Dow Jones co-owns Factiva with Reuters, SmartMoney with Hearst and CNBC television operations in Asia and Europe with NBC Universal. Dow Jones also provides news content to CNBC and U.S. radio stations.

Web sites: http://www.RealEstateJournal.com
http://www.dowjones.com


Source: RealEstateJournal.com

CONTACT: Beth Brody, Brody PR (for RealEstateJournal.com),
+1-609-397-3737, bebrody@aol.com


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