Mortgage payments that grew more expensive over time were one of the main culprits of the housing bust that led to a worldwide, financial disaster in the mid-2000s. And now one of the types of loans that defined that era is staging a comeback.
More homebuyers are choosing adjustable-rate mortgages, which offer lower monthly payments initially, to contend with record-high home prices. Those lower monthly payments, instead of traditional 30-year fixed-rate mortgages, are proving to be a strong lure for buyers looking to afford a home in the white-hot housing market.
Applications for ARMs had been steadily growing and were up 12.5% year over year in the week ending June 18, although they fell in the following week, according to the Mortgage Bankers Association.
“The epic surge in home prices has people looking to save money on monthly payments anywhere they can,” says Matt Graham, chief of operations at the industry publication Mortgage News Daily.
But buyer be warned: The mortgage rate on these loans resets after a set period of years, usually five or 10.
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