Why does an adjustable mortgage attract high loan?

[stella7]

How do i know that the adjustable mortgage rate is low?And why does sometimes a lower adjustable mortgage rate allow a higher loan?

[mamab]

Personally, I wouldn't use an adjustable rate mortgage unless it was the ONLY way I could get a loan for a house. Then, I'd change it to a fixed rate as soon as I could. There are just so many variables. While you might start out with a lower rate, it has the propensity to increase on a regular basis, thus raising your payments as well.

[LyricB]

The adjustable rate mortgages (ARMs) are lower because they will likely fluctuate up. Lenders know they will make more money in the long run.

[aquariancore]

Adjustable morgage rates became popular in the early 8's when mortgage rates were through the roof. Basically they are a gamble long term because according to your contract they fluctuate with the prime rate. In the eighties many people gambled and won because the rate eventually went down. While they were low in the last couple of years many people with adjustables refinanced.

[LyricB]

A few years ago when I worked as a mortgage loan officer the rates were rock-bottom. I cautioned all my customers against getting ARMs, but all they saw were the low rates and didn't think about the long-term.

[aquariancore]

Now they are on the way to losing big time.

[LyricB]

No kidding! I'll bet that as their interest rates are climbing they are thinking, "Why didn't I listen to that lady at the credit union?"

[aquariancore]

Quote:

Originally Posted by LyricB

No kidding! I'll bet that as their interest rates are climbing they are thinking, "Why didn't I listen to that lady at the credit union?"

There are a few companies that are trying to steal accounts. I'll bet with good shopping they can get a great low rate if they act fast.