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Mortgage Rates Likely to Increase

Mortgage Rates Likely to Increase

If you took out a mortgage ten years ago, you were most likely certain that it was the best time, and the best rate because the housing bubble was at its Peak. Well it is almost 2015 now, and those loans taken out in 2005 are about to burst.  Monthly payments will reset, all higher and in some cases they may even double- especially if you have an adjustable rate or interest-only period. 

The problem here is that hundreds of thousands of people with sub-prime credit took out prime, jumbo loans, ones in which they would not have been able to afford via a fixed rate-loan, loans that Fannie Mae and Freddie Mac would have never have approved. Today, more subprime loans have reset than the total number of affected prime jumbo loans, but the payments will hugely increase above what they did for subprime loans. 

Interest rates may remain low these next few years, however principal payments will start to be due and borrowers whose loans were set to reset after ten years now have only 20 years left to repay what they borrowed – meaning the monthly principle payment will be higher now than it would have been if they had taken out a fully-amortizing loan, or a subprime loan with shorter, interest-only periods. 

What this means for borrowers: Pay higher monthly bills, default or look into refinancing options.

 

For more information or if you have any questions tweet us @CelticBank or call 1.888.232.2701

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