Wednesday, September 13, 2006

Assessing Option ARM Risk

Check out this article from It discusses 5 ways to asses the risk of your option ARM. If you're not familiar with these products...
An option ARM is an adjustable-rate mortgage that gives the borrower four choices of a payment each month. The borrower can pay the amount necessary to pay the loan off in 15 years or in 30 years. The borrower can pay only the interest charged in the previous month. Or the borrower can make a minimum payment that doesn't even cover the interest, so that the loan balance increases.
For the unwary, they are financial quicksand. When you hear the experts talking about 'exotic loan products', this is what they mean. Borrower beware!