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10/01/06, 08:34 AM
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Join Date: Sep 2003
Location: Whiskey Flats(Ft. Worth) , Tx
Posts: 8,749
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Did you Finance Your Homestead with an .....ARM??
...................Been reading on Yahoo about all the potential problems with folks financing realestate purchases with adjustaBLE RATE MORTGAGES . They had one example of the initial payment being $643 amonth then it went to $1645 during the 6th. year of the mortgage . Further , it seems those whom didn't really understand the Terms of the Loan must , NOW , sell too payoff a home that they cannot afford the payments on . And , of course it's now a Buyers market further compounding their problems . fordy... 
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10/01/06, 08:43 AM
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Registered User
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Join Date: May 2002
Location: SE Indiana
Posts: 7,310
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We did, but we refinanced after a year to get a fixed rate. We needed that eyar to get some things in line to be able to afford the higher payment of the fixed rate. We were also able to go from a 30 year ARM to a 20 year fixed rate. Payment went up about $100 a month by changing, but it was worth it to get the shorter term & fixed rate. We have been paying as much extra as we can to get it paid off even sooner.
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I can't believe I deleted it!
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10/01/06, 08:47 AM
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Singletree Moderator
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Join Date: May 2002
Location: Kansas
Posts: 12,974
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We own 2 parcels of land, one with and one without a house on it. The property with the house is on a fixed rate.
The only way we could finance the bare land was with an ARM, and I do HATE the things! On the good side, there is a cap on how high the interest rate can get. Our monthly payment has gone up $50 and I expect it will go up $25 more, but that is as high as they can go on it.
With the ARM, the payments started at $150 and will go up to $225.
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10/01/06, 10:00 AM
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Banned
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Join Date: Jul 2006
Location: N. Calif./was USDA 9b before global warming
Posts: 4,596
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Wendy, that's a great arrangement I'm glad for you!
Terri, I hope that the upper payment limit also prevents them from negative amortizing, which is where your monthly payment cannot exceed x, but if their interest forumula says you should be paying x + y, they add y back to your principal each month while keeping your actual payment capped at x.
So, if you *did* have the demon of negative amortization, your payment would be capped $225 each month, but if their interest formula said it should be $250, then each month your amount due to pay off the loan would go up by $25.
I hope you checked the fine print! Otherwise you may be wise to refinance as well.
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10/01/06, 11:02 AM
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Living in the Hills
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Join Date: Apr 2005
Location: South Dakota
Posts: 4,534
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We have a fixed right now, in one year it goes to an ARM. We weren't done with the house so they wouldn't do a straight Fixed. Now we are re-fi to do the last little bit (finish work we haven't been able to figure out how to do or don't have the equipment for) & going to re-fi to get the straight fixed rate. Or sell. We would realy like to just sell.
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10/01/06, 12:12 PM
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Registered Nut
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Join Date: Feb 2006
Location: Alaska
Posts: 189
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We searched for land in an area that we could afford to pay cash for. Now we hope to buy up some land around us as we save the money. No guarantees, but we could be happy on our modest piece of land as well.
Salmonberry
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"Do I contradict myself? Very well then, I contradict myself. I am large. I contain multitudes" Walt Whitman
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10/01/06, 02:28 PM
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Join Date: Sep 2006
Posts: 413
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An ARM is legalized robbery. I don't know which is worse, and ARM or one of those 'interest only' loans. Remember back in the 80's when people were losing houses to 'baloon payments'? I swear it seems to me that bankers and mortage companies do their best to set people up for a fall with some of these 'easy' mortgage scemes. Makes you wonder if any of the underwriters of these plans ever intend for the buyer to pay off the note. What ever happened to old fashioned bankers who wanted people to pay off their mortgages.
Simple really. No mortage = more 'disposable' income = bigger savings and more investments.
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10/01/06, 05:24 PM
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Singletree Moderator
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Join Date: May 2002
Location: Kansas
Posts: 12,974
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Quote:
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Originally Posted by suburbanite
Wendy, that's a great arrangement I'm glad for you!
Terri, I hope that the upper payment limit also prevents them from negative amortizing, which is where your monthly payment cannot exceed x, but if their interest forumula says you should be paying x + y, they add y back to your principal each month while keeping your actual payment capped at x.
So, if you *did* have the demon of negative amortization, your payment would be capped $225 each month, but if their interest formula said it should be $250, then each month your amount due to pay off the loan would go up by $25.
I hope you checked the fine print! Otherwise you may be wise to refinance as well.
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I did, indeed, check the fine print. There will be no negative amortization.
And, I CANNOT refinance because out here, the very few folks who lend on bare lans ALL seem to only offer ARMs!
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10/01/06, 05:57 PM
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Banned
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Join Date: May 2002
Location: SC and soon to be NC
Posts: 1,687
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Nothing stops a person(with good credit,etc) to simply refinance the 'evil' ARM(that most people were VERY happy to get..) into a regular fixed rate mortgage...
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10/01/06, 06:19 PM
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Join Date: Oct 2003
Location: Carthage, Texas
Posts: 12,261
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Devils Advocate speaking.......
Lots of folks get loans that they cannot afford... Should only the folks with sterling credit and great jobs be the only one to get loans... You know the old saw about 'bankers only giving loans to people who have money already'.
ARMs and No Interest loans never made sense to me. Of course, loans for homes never made sense to me either. If you live beyond your means, there's always a good chance of losing everything, if times turn hard.
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Luck is what happens when preparation meets opportunity. Seneca
Learning is not compulsory... neither is survival. W. Edwards Deming
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10/01/06, 06:50 PM
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zone 5 - riverfrontage
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Join Date: Oct 2005
Location: Forests of maine
Posts: 5,872
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We paid cash money.
No mortgage and no insurance.
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10/01/06, 07:40 PM
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Singletree Moderator
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Join Date: May 2002
Location: Kansas
Posts: 12,974
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Quote:
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Originally Posted by oz in SC
Nothing stops a person(with good credit,etc) to simply refinance the 'evil' ARM(that most people were VERY happy to get..) into a regular fixed rate mortgage...
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My credit is superb, but the banks out here do not make fixed rates loans on bare land. I think they KNOW that we will accept them because that is what is available.
Even so, I calculated the maximum possible payment and I KNEW we could swing it: that is WHY my credit is superb! 
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10/01/06, 07:54 PM
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Registered User
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Join Date: Oct 2002
Posts: 3,143
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FarmGoddess, I respectfully disagree with your comment that ARMs are legalized robbery.
1) Nobody puts a gun to someones head to get one.
2) There are cases where an ARM may make sense. In a time of declining or stable interest rates they may reduce monthly payments (and increase cashflow) with little additional risk. It's not like rising interest rates just happened overnight.
3) Most people don't read the fine print (or any of the print) when they purchase property and/or take out a mortgage. The title company/escrow agent I prefer to work with knows to leave plenty of time when we close. DW and I prefer to close in person so that we can get answers to any questions we have ....before we sign. Our escrow agent tells us that we are about the only people she knows that read all the documents from start to finish. We usually find at least one minor discrepancy in the paperwork in about half the transactions.
4) I personally don't see myself taking out an ARM to purchase a property. If there was a property I wanted to lock up and the only way to do it was temporarily taking out an interest only loan, I might consider it under the right circumstances. It wouldn't be a long term thing, only a bridge loan.
Terri, if your property is agricultural and meets the requirements you might want to consider contacting Farm Credit Services. They are competitive for home loans and 10 to 30 year ag/raw land loans run about one point (varies depending on term) over home loans with a minimum 20% down.
As I have pointed out in other discussions, The freedom to make choices has to include the freedom to make poor choices. If you over extend yourself to buy a property then you are taking a risk that things may implode. It doesn't matter whether it is an ARM, an interest only or a regular 30 year conforming.
Mike
Last edited by Mike in Ohio; 10/01/06 at 07:58 PM.
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10/01/06, 08:05 PM
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Singletree Moderator
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Join Date: May 2002
Location: Kansas
Posts: 12,974
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Thanks, Mike, I will check on that.
It is unfortunate that I cannot work the land at present due to unexpected health problems: I still hope to someday but there are a few major wrinkles that I have to work out first. Still, it USED to be a cow pasture and it is zoned agricultural so maybe??????
Texican makes a good point. Life changes and hard times happen. For us it was take out a mortgage or not own property at all, but we were VERY carefull not to cut it too thin! I had expected to be working once the kids started school, and I could not, but because we did NOT over extend outselves we are not in trouble now. It's tight, but very do-able.
I ALSO read the mortgage contract: it is a 25 year contract so it seemed worth the time spent!
Last edited by Terri; 10/01/06 at 08:13 PM.
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10/01/06, 09:24 PM
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Banned
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Join Date: May 2002
Location: SC and soon to be NC
Posts: 1,687
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Quote:
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Originally Posted by Terri
My credit is superb, but the banks out here do not make fixed rates loans on bare land. I think they KNOW that we will accept them because that is what is available.
Even so, I calculated the maximum possible payment and I KNEW we could swing it: that is WHY my credit is superb! |
I was referring more to those that have ARMs on homes....
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10/02/06, 06:36 AM
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Singletree Moderator
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Join Date: May 2002
Location: Kansas
Posts: 12,974
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Quote:
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Originally Posted by oz in SC
I was referring more to those that have ARMs on homes....
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AH!
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10/02/06, 07:16 AM
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Join Date: Apr 2005
Location: sw Ct / sw Va
Posts: 431
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Did you Finance Your Homestead with an .....ARM??
Yeppers .. An ARM and a LEG 
ARMs make sense on an initial loan or a refy as long as
you are planning to sell the property prior to the reset date ..
Triff ..
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10/02/06, 07:39 AM
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Join Date: Jul 2005
Location: Central WV
Posts: 5,390
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Part of our property is financed with an ARM - again, that's the only type of loan that was available on that parcel. There are caps on how much they can raise the payment in a given amount of time, and caps on how much they can raise the payment over the life of the loan. There are no penalties for paying it off early (and we're working hard on doing just that).
I don't know if we have that negative amortization where they can add on to the loan any amount you "should" be paying but aren't, due to rising interest rates and the cap. I think we'll have our loan paid off before we could get into a negative amortization situation even if it is allowed in the loan contract but I definitely want to check on that! Thanks for mentioning it, suburbanite!
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Our homestead-in-the-making: Palazzo Rospo
Eating the dream
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10/02/06, 09:51 AM
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Join Date: Dec 2002
Posts: 329
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Quote:
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Originally Posted by oz in SC
Nothing stops a person(with good credit,etc) to simply refinance the 'evil' ARM(that most people were VERY happy to get..) into a regular fixed rate mortgage...
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Not especially so. Many of those toxic loans come with hefty prepayment penalties, so if you want to refi, better bring a large check to closing.
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10/02/06, 09:57 AM
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Banned
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Join Date: May 2002
Location: SC and soon to be NC
Posts: 1,687
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Quote:
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Originally Posted by Bruce in NE
Not especially so. Many of those toxic loans come with hefty prepayment penalties, so if you want to refi, better bring a large check to closing.
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Not one of the many times we have refinanced has this happened...
Perhaps we are just REALLY lucky.
NEVER had a prepayment penalty and it is AGAIN not the fault of the lender if the consumer doesn't 'bother' to read or ask questions as to the conditions of the loan...
To me this seems like ANOTHER version of the lament of modern members of society....
''Oh WOE is me,I borrowed money and didn't bother to pay attention and NOW I am actually being held to the conditions of the loan''
No-one to 'blame' but themselves....
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