There is nothing inherently wrong with option ARMs. The option you choose may be more disadvantageous that the other options.
With the rates for fixed rate mortgages so close to the rates for ARMs, you mitigate your interest rate risk for long term holdings much better with a fixed rate loan product.
I think they can be a great investment tool -- for the right situation. And as NewKid pointed out, there’s nothing inherently wrong with them.
The problem is when people use them when they really can’t afford the loan in the first place. If that’s the case, and they’re just paying the minimum because they have no choice, they’re just burying themselves deeper and deeper. And it will ultimately catch up with them. In a rapidly appreciating market, that’s not necessarily a problem. But that’s not the case in today’s market.
But for an investor who knows what they’re doing, they can be a great short-term cash-flow tool.
There is nothing inherently wrong with option ARMs. The option you choose may be more disadvantageous that the other options.
With the rates for fixed rate mortgages so close to the rates for ARMs, you mitigate your interest rate risk for long term holdings much better with a fixed rate loan product.
Thanks for your response Newkid.
Any other opinions on this issue?
JS
I think they can be a great investment tool -- for the right situation. And as NewKid pointed out, there’s nothing inherently wrong with them.
The problem is when people use them when they really can’t afford the loan in the first place. If that’s the case, and they’re just paying the minimum because they have no choice, they’re just burying themselves deeper and deeper. And it will ultimately catch up with them. In a rapidly appreciating market, that’s not necessarily a problem. But that’s not the case in today’s market.
But for an investor who knows what they’re doing, they can be a great short-term cash-flow tool.
My 2¢