Doubling Down With a Second ARM

When home buyers began flocking to adjustable-rate mortgages earlier in the decade, there was concern about what would happen when the introductory sweet-heart rates ran out. With 5% of all mortgage debt resetting this year, we’re starting to get our answer: Rather than lock in a long-term fixed rate, these owners are rolling their mortgage over into new adjustable rate deals, sometimes pulling out even more equity in the process. They’re trying to put it off forever, which is O.K. as long as interest rates are low,” says Frank E. Nothaft, a vice president and chief economist at Freddie Mac. “But when they start to spike, then it’s going to be more problematic. Personally, we’d have a hard time sleeping at night, but, on the other hand, these folks may end up looking like the smart ones in a few years if rates remain relatively low and the real estate market has a soft landing. Only time will tell.
Re-Refinancing and Putting Off the Mortgage Pain [NY Times]