I may get flamed for this, but with free speech I can live with that. So, I listen to NPR / public radio and lately I’ve been hearing stories about people who are upset that the banks are taking advantage of them. They are complaining about how the banks / lenders are “raping” them. That word really bothers me out of context. If I continue down that road I’ll be on a tangent. Therefore I’ll spare you and continue down my rant about the housing crisis.
ARM – Adjustable Rate Mortgage
Somehow the AR – Adjustable Rate was taken out of the ARM and now we have Mortgage. So, complaints about how the lenders didn’t inform me about my rate increasing after x years are great except…. drum roll please… You signed an ARM, and it will adjust. Did you read the fine print? It was all spelled out in “plain” english. Well it may not have made sense, but a contract is legally binding. Therefore if you enter into a contract make sure you understand what you are signing.
ARM’s are great if you intend to sell fairly soon and before the loan adjusts. However, we now have a large percentage of people who have ARMs that are adjusting and they can’t make their payments.
Where does that leave us? Well we have a major deficit in our education system — FINANCE 101 or maybe FINANCE 001. First thing that needs to be taught is that cheap money comes at a cost and markets don’t always go up.
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