Home prices have reached record levels, and in many parts of the country, homes have become nearly unaffordable.Real estate has replaced the tech stocks of the late 1990’s as the hot investment, and everyone has sold their stocks and jumped into investment property.Real estate prices have increased at a far greater rate than salaries, and the lending industry has attempted to solve this problem by introducing a tremendous number of mortgage options for borrowers who barely capable of purchasing a home.Most of these loan types feature adjustable interest rates and minimum down payments. One of these, the option ARM, is the most dangerous type of loan ever introduced.Borrowers who are considering an option ARM should be aware that this loan could leave them with a loan that is worth far more than the home it’s used to buy and with a loan that he or she cannot afford to pay.The option ARM is not for the squeamish.
So what, exactly, is an option ARM?An option ARM is a mortgage with an adjustable interest rate that typically gives the borrower four different payment choices each month. The first choice is based on a 30-year amortization table; the second on a...
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