With the current Santa Cruz foreclosure woes, and the strains of the economy these days, many people are worried about what they’ll do when their ARM (adjustable rate mortgage) resets. Here are a few suggestions to help you weather the current financial storm:
What is an ARM?
ARM refers to a mortgage loan that has a variable interest rate. The amount of the monthly payments will change several times over the life of the loan. ARMs usually have a lower introductory interest rate than a fixed-rate mortgage. After a period of time, the interest rate is recalculated, resulting in a higher interest rate and monthly payment.
Get Out Your Loan Paperwork
Many homeowners are worried about what will happen to their monthly payments when the ARM resets. Foreclosure is a real worry. The best way to avoid Santa Cruz foreclosure is to know exactly what the terms of your loan agreement are. Look for the date that the interest rate is set to change. Find out what the cap is on each interest rate adjustment, and what the cap is for interest increases throughout the life of the loan.
After you have gathered that information, you can calculate what your ARM will reset to. It’s best to know what the worst-case scenario payment could be when your ARM adjusts. This information can help you determine if you are going to need help getting your loan payments manageable. The next step is to make a detailed list of your current and future income and bills. This will give you a better understanding of your financial status.
Call Your Mortgage Company
If, after you make this list, you can see that you are going to have trouble making the difference in the monthly payments, call your mortgage company. It’s best to call them before you miss a payment. They may be able to renegotiate the terms of your loan for you.
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