Foreclosures: record highs, scary subject, horror stories. According to RealtyTrac, Arkansas ranked #26 in foreclosures in 2007. Why is this happening and what can homeowners (and the professionals who help them) do to stay out of the line of fire?
Most analysts suggest that the spike in foreclosures is due to an increase in the number of adjustable rate mortgages (ARMs). An ARM is a mortgage where the interest rate can fluctuate. As a homeowner this, of course, means your mortgage payment adjusts - typically up! As a result many homeowners can not afford this new payment.
So, what can you do? I'm usually not an advocate of refinancing, but there are instances where it can be beneficial. For example, a few years ago my parents refinanced their home. They had purchased at a higher interest rate a few years earlier and wanted to take advantage of the market's current lower rates. The result? A payment that is $2 more each month, but took 7 years off their mortage. Wow! So if you have an ARM, consult with a mortgage lender. If today's interest rate is lower - and it probably is - than the rate of your ARM, it might benefit you to refinance in order to lock in a rate. Some quick 2007 statistics (from RealtyTrac)
- Nationwide there was a 74.99% increase in foreclosures
- Arkansas experienced a 26.44% increase
- A total of 6.406 foreclosure filings were recorded in Arkansas