ARM Holders Face Decision When Fixed-Rate Period Ends
(WALL STREET JOURNAL)- After a lull in home mortgage refinancings, lenders are bracing for a stampede.
But this time it's not just the typical rate chasers or "cash-out" refinancers. Borrowers who purchased homes using hybrid mortgages over the past five years are entering, or about to enter, the riskier adjustable-rate phase of the loan. Many of these homeowners are eyeing new loans for protection.
With a hybrid, homeowners get a relatively low, fixed interest rate on a long-term mortgage for a short time, typically three, five or seven years. Afterward, the loan converts to an adjustable-rate mortgage, or ARM, and the interest rate fluctuates periodically over the remaining life of the loan.
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