Adjustable Rate Mortgages Squeezing Colorado Homeowners

Refinancing and purchasing of homes into adjustable rate mortgages became popular when rates reached their lowest in 2003. When interest rates started rising in 2004 lender’s shifted to interest only loans and option arms, a product that was once reserved for investors.

In 2003 1.1 percent of all mortgages originated in Colorado were option arm loans, and another 2.5 percent were interest only loans. In 2005 20.1 percent of Colorado loans were interest only and 5.5 percent were option arms. Through this year interest only and option arm loans are down to 12.5 percent total, which is a great improvement over the high previous numbers. As the public becomes more knowledgeable about these toxic loans they are getting them less and less. These Loans don’t offer a free ride forever. Once the principal and unpaid interest reaches a trigger on an option arm, typically 115 percent of the original loan amount , the mortgage recasts into an amortizing loan with payments two, three, or more times as high as the original minimum payment. Many times now these borrowers now owe more than their homes are worth making it difficult for them to refinance.

To read more about Crushing ARMs squeeze homeowners head on over to the Denver Post.