This is a sample ad from lender ING, advertising an adjustable rate mortgage. I honestly wish they would outlaw ARM mortgages.... they just have trouble written all over them. Most of us working class people will not have a substantial windfall in 5 years. To me, this is really more of a "bait & switch" marketing scheme.... advertising one thing & delivering quite another. They should just have fixed rate loans-- you lock into a specific interest rate, with no early pre payment penalty. If you find you have extra money (not a complaint I hear much of these days )...... you can either make a lump sum payment, or pay it off. The ARM loan seems like a trap to me. Check it out
General Rates and Payments:
|Product||% of Home Value Borrowed||Rate||APR||Monthly Payment||Payment Period|
|5/1 Orange Mortgage||75% or less||4.250%||3.925%||$2,459.70||Year 1-5|
|7/1 Orange Mortgage||75% or less||4.375%||4.044%||$2,496.43||Year 1-7|
APR based on a 30-year $500,000 loan as of October 7, 2009. Payments do not include applicable taxes and insurance. Actual obligation will be greater. Interest rate may increase after fixed rate period. Projected interest rate based on current index plus margin.
Notice the "projected" column shows a reduced rate.
The fine print says the rate "may increase"....
The projected rate should say we have no clue whatsoever-- total crapshoot.
These loans have people literally gambling the roof over their heads.
No wonder we are awash in Foreclosures!
If I were to buy another home I would be sure to run the application past a lawyer first just because these "deals" are so questionable. And yes, fixed rates only is the only way.
Let's face it they are pulling those projections out of their arses. A magic 8 ball would be equally effective.
Wildcard high risk mortgages..... like that has worked out well in the past!
Fixed rate is the way to go, same deal-- credit card offers with variable interest rates go right to the shredder. Buh Bye!
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