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One of Those Days I'm Glad for my Plain Jane 30-Year Fixed Mortgage
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Thursday, August 30, 2007
6:39:00 PM EDT
Hearing Hey Jack Kerouac -- 10,000 Maniacs
Looks like things are about to get nastier on the mortgage front:
Millions of homeowners around the nation are now getting the news in the mail: The interest rate on their home loans is going up, possibly to double-digit levels...
The peak for resetting loans will be in October, when the rates on some $50 billion worth of mortgages are likely to rise by 2 percentage points or more. This could mean a rise of several hundred dollars a month for many borrowers.
For example, on a $210,000 loan balance (the average subprime amount in 2006), the additional 2.5 percentage point increase on the interest rate adds about $4,560 a year, or about $380 a month, estimates James Kragenbring, senior investment officer at Advantus Capital Management in St. Paul, Minn. That means the median household would have to devote an extra 9.5 percent of income just to pay the extra interest.
We have two mortgages -- one on our house in Virginia and one on the one we live in here in Ohio -- and the thought of either of them suddenly spiking up a couple hundred dollars a month would be enough to give me a serious case of angina. Fortunately, we have the basic 30-year fixed rate loan, which goes neither up nor down save for some minimal property tax escrow fluctuations. We had the opportunity to do an ARM but it didn't make sense for us (we bought our houses to live in them, not to flip them in a couple of years), and in retrospect it was one of the smarter financial decisions we made.
If you have an ARM, how are you dealing with the increases? Are you going to be okay?
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6:39:00 PM EDT
Hearing Hey Jack Kerouac -- 10,000 Maniacs
One of Those Days I'm Glad for my Plain Jane 30-Year Fixed Mortgage
Looks like things are about to get nastier on the mortgage front:
Millions of homeowners around the nation are now getting the news in the mail: The interest rate on their home loans is going up, possibly to double-digit levels...
The peak for resetting loans will be in October, when the rates on some $50 billion worth of mortgages are likely to rise by 2 percentage points or more. This could mean a rise of several hundred dollars a month for many borrowers.
For example, on a $210,000 loan balance (the average subprime amount in 2006), the additional 2.5 percentage point increase on the interest rate adds about $4,560 a year, or about $380 a month, estimates James Kragenbring, senior investment officer at Advantus Capital Management in St. Paul, Minn. That means the median household would have to devote an extra 9.5 percent of income just to pay the extra interest.
We have two mortgages -- one on our house in Virginia and one on the one we live in here in Ohio -- and the thought of either of them suddenly spiking up a couple hundred dollars a month would be enough to give me a serious case of angina. Fortunately, we have the basic 30-year fixed rate loan, which goes neither up nor down save for some minimal property tax escrow fluctuations. We had the opportunity to do an ARM but it didn't make sense for us (we bought our houses to live in them, not to flip them in a couple of years), and in retrospect it was one of the smarter financial decisions we made.
If you have an ARM, how are you dealing with the increases? Are you going to be okay?
Written by johnmscalzi Blog about this entry |
Add to del.icio.us | digg this
This entry has 2 comments: (Add your own)
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When we got our mortgage nearly 15 years ago we got a decent rate. Good enough that during the series of re-fi madness that has swept the country every couple of years that it wasn't worth it to change. All the rates much lower than ours were either ARMs or had other weirdness built in. In addition, we chose a bank that has a policy NOT to sell its accounts elsewhere. And they haven't. Can't tell you how horrible it's been for some people we know who've had their mortgage sold and resold every couple of years -- and they have no control over it! Why would you want to do business that way?
Anyway, our mortgage has been stable and predictable lo these many years and that's just fine with us. Never tempted to get a second mortgage for "home improvements", big screen TV or a Hawaiian vacation, so we don't have those traps either.
I fear that the current business is going to ruin a lot of people who shouldn't be classified as deadbeats. NPR last night said there will be 2 million foreclosures in 2007.
Dr. Phil
8/31/07 4:50 PM
And now we rent a lovely apartment by the ocean and I will never move from here - except for feet first. Unless this place comes up for sale, and then I'll get myself wicked damn locked in on a no moonkey business rate. That's right, I said "moonkey" business. Wanna fight about it?