Avoid an ARM to Thwart Financial Disaster!

Avoid an ARM (Adjustable Rate Mortgage) at all costs if you know what's good for your financial well being. Most ARM loans end up in foreclosure if you aren't careful and know exactly when and how to get out of the loan.

An ARM is going to sound very enticing to you if you have past credit problems or want a very low interest rate. They are very flexible and can ease up your financial burden if you don't make a lot of money. But just like it is called, it adjusts with the market, and if you know the market, it moves up and down very rapidly.

I know from personal experience how fast your interest rate can go up with an ARM. After I refinanced my original mortgage that was fixed at 7% with an ARM that started at 5.38%, my payments were pretty great. I took $30,000 out of my equity and my full mortgage payment only went up by about $200.00 per month. The ARM was steady at 5.38% for one year and everything was chipper, until the start of the next year. EVERY month, my interest rate percentage went up by about .15 to .24 percent. When my interest rate reached 7.14% within another year, it was really starting to take its tool. Thank God I thoroughly read my mortgage documents at closing because I didn't sign them at first. The original draft said that I couldn't refinance unless I went through them as a lender and at the same or a higher interest rate. I negotiated that out of my mortgage terms and was able to refinance my mortgage through another mortgager at a fixed rate below 7 percent.

I was lucky in my situation. But there are so many people out there who are not so fortunate. They reach such a high percentage of interest (anywhere from 11 to 26 percent) and can't even manage to pay the minimum "interest only payment" of their payment options. This is why so many people are filing for bankruptcy or their property is being foreclosed on.

Avoid an ARM at all costs and you will have more security with your mortgage. A fixed mortgage interest rate is the only way to go. Even if the market is very poor and mortgage rates sour, your loan will be fixed at whatever rate your loan was locked in on.

Don't fall for the ARM scams. They only benefit the lender, though at the time you may believe you are benefitting from the ARM.

Here's a very useful website I found called Ripoff Report. Here is some of the reasons you want to research lenders and avoid an ARM when refinancing or purchasing your new home. Wow! You will be shocked at how many different people have been defrauded by one lending company alone with regards to ARMs and several other poor lending practices. Feel free to look up your lender and see what people have to say about them.