HELOC, ARM, OPTION, MTA, LIBOR

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HELOC, ARM, OPTION, MTA, LIBOR

If your mortgage has any of those acronyms attached to it you may be in for a bit of a surprise when those loans come due to adjust out of their fixed rate introductory periods.

All of the loans above are directly tied to market indexes plus margins; when the indexes such as prime rate go up so does the rate on your loan. The part of this that sneaks up on you with ARM loans are for the first few years you are locked at a fixed rate. If you began a loan tied to prime rate in 2004 and it is due to adjust in 2006 you may be in line for a healthy payment increase.

Most loans will adjust at 2, 3, 5, or 7 years into the life of the loan. You have budgeted accordingly for that fixed payment. What happens when that loan adjusts and you now have a larger payment? ARM loans are a very effective tool for short term financing and for borrowers that may have had slightly challenged credit or very high loan to value ratios at the time of the purchase or refinance. They are not good loans to leave unattended in the currently rising market.

Some other types of loans that you may already be noticing a rate and payment increase on are the HELOCs or Home Equity Line Of Credits. These loans are often used in place of a down payment when purchasing a home or a need to use some of the equity from your home as other expenses arise. A HELOC adjusts each time the prime rate adjusts. If you have had your HELOC loan for the last eighteen months you have seen fourteen consecutive rate increases on that HELOC loan. How is that payment looking now?

A few things may have changed since your loan was originated. Your home more than likely has grown in value in that time, and if you made your payments in a timely fashion your credit scores may have improved. You now may have more options available to you with longer term fixed rate loans than you did before.

I would be more than happy to take a look at your current adjustable mortgage and other rate indexed debt, such as credit cards and see what we can do to stop the payment increases. We may even be able lower your monthly household payments.

With the amount of your mortgage payments possibly increasing and the new credit card policies charging larger monthly minimum payments you should seriously look at what you can do to stop this runaway train before it derails your monthly budget.