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The BIG BAD Adjustable Mortgage
Let’s talk about adjustable rate mortgages. Everybody's afraid of them. Well, I understand why... because nearly 10 years ago, during the real estate boom, people were doing adjustable rate mortgages, they were getting into a mortgage with a 1% rate to start, and then all of a sudden, it became 6% and 7%. That’s not how true adjustable rate mortgages work, those were predatory loans that no longer exist, they're all illegal now. The Fed announced a couple weeks ago, they’re gonna start dropping the Fed rate, they're gonna start dropping, the adjustable rates that pretty much everybody follows: LIBOR, the Prime rate, the Fed rate... they all follow the same rules so to speak. When the Fed says that they're gonna drop the rates, guess what? The rates are gonna go down. If you have an adjustable rate mortgage at 3.5%, and a fixed rate at 4.5%, and you know that the adjustable rates are going down. Isn’t an adjustable rate better than a fixed rate in that case? Of course some clients tell me: “Phil, you weren't around in the 80’s” I was, but I wasn’t cognizant of interest rates (hehe). Either way, are we ever going to get those 18% rates ... more
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