Enter the adjustable-rate mortgage. During the first half of 2022 as interest rates climbed, the share of adjustable-rate mortgages nationwide rose from 3% to 10% of loans, according to the Mortgage Bankers Association.
He said that in the last 90 days, he has seen the number of adjustable-rate loans in the bank’s pipeline increase about 5%. Republic lends in the tristate area and New York. A percentage point may not seem like much of a difference, but homeowners potentially could shave hundreds of dollars off their monthly payments.
But Giovanetti’s second thought was that the market is in a very different place than it was then. The loan servicing industry is more regulated, and lenders are more concerned with making sure borrowers can afford loans. The main concern is that homeowners may no longer be able to afford payments once their mortgage rates adjust. Because although rates could adjust downward, lenders bet on rates rising. Homeowners could end up spending more monthly and over the lifetime of the mortgage than they would with a fixed-rate loan.
Whether these mortgages can be a good idea depends on the value borrowers can get from the initial lower rate. The number of years the interest rate stays fixed varies with the type of loan. When the fixed rate ends, some loans adjust every six months, while others adjust annually.
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