ARM borrowers may see monthly payments spike at first rate adjustment
CNBC • • business
Key Points:
- Approximately 150,000 homeowners with adjustable-rate mortgages (ARMs) will face their first interest rate adjustment this year, potentially leading to significant increases in monthly payments due to rising rates since loan origination.
- ARMs represent about 5.6% of the 55.4 million active U.S. mortgages, with many borrowers currently in their fixed-rate introductory period before adjustments begin.
- Borrowers with ARMs originated years ago at low initial rates may see their payments jump by hundreds or over $1,000 monthly, while some recent ARM borrowers could see rate decreases.
- Homeowners facing adjustments can either keep their ARM or refinance to a fixed-rate mortgage, though refinancing involves closing costs and requires good credit.
- Lenders must notify borrowers 7-8 months before the first adjusted payment, and housing counselors are available to assist those concerned about affording new payments or seeking loan modifications.
