Re-refinancing, and Putting Off Mortgage Pain
By VIKAS BAJAJ and RON NIXON
Published: July 23, 2006
....millions of Americans have turned to adjustable-rate mortgages, or A.R.M.’s, in recent years to afford a home as prices soared.
Typically set at artificially low rates in the first years of the loan, these mortgages are then reset at the prevailing interest rates. For borrowers, the bet was that interest rates would remain low.
Now, the first big wave of the mortgage boom is cresting as more than $400 billion worth of adjustable-rate mortgages, or about 5 percent of all outstanding mortgage debt, will readjust this year for the first time, according to Loan Performance, a research firm. Next year, another $1 trillion in loans will readjust.
When that happens, for instance, a typical borrower with a $200,000 A.R.M. could see his monthly payments increase nearly 25 percent when the A.R.M. adjusts from 4.5 percent to 6.5 percent. In total dollars, that is an increase from $1,013 a month to $1,254.
Yet instead of paying more now, many borrowers are refinancing into their second or third adjustable-rate mortgage, loan data indicate and industry experts confirm....
http://www.nytimes.com/2006/07/23/business/23mortgage.html?hp&ex=1153627200&en=48d3badc80108762&ei=5094&partner=homepage