Boston borrowers with ARMs due to reset in 2012 may be wondering what is in store for them. Those who want to take advantage of a strengthening housing market and low interest rates in 2012 can recognize that sometimes an ARM makes sense. The good news is that the biggest changes have already passed and that upcoming resets will be based on continuing low interest rates and a recovering housing market.
image via active rain
Benefits of the ARM
The adjustable-rate mortgage comes with an introductory period. During this time, the interest rate is lower than that of a fixed loan. After the introductory term has expired, the rate can go up or down. A fixed rate mortgage is appealing to borrowers, especially with interest rates that are near historic lows. An adjustable-rate mortgage with a lower rate of interest can benefit Boston property owners who will be paying off the mortgage within a few years.
Adjustable Rate Mortgages come with Risks
While a Boston borrower may reap an advantage with a short term ARM, there are still risks. If the mortgage is not paid off before interest rates on the loan start to go up a future reset may mean the loan payments will be higher and the borrower will have to be approved for a different type of mortgage. If their financial circumstances have changed drastically since the ARM was approved, they may find themselves stuck with a payment that they can no longer afford if future resets will reflect higher interest rates.
Outlook for Boston Home Owners with ARMS due to Reset
The prices of homes are consistently rising and home sales are improving with the low interest rates. Mortgage interest rates have been low and fell even further when the Federal Reserve began to buy mortgage bonds in September in an effort to encourage people to borrow money to buy a home. They stated that the buying of bonds would continue until substantial improvement in job markets was shown. With the promising signs of recovery, Boston homeowners have ARMs should look at their unique situations realistically before making changes. The 2012 ARM resets should have a minimal change to your loan.