For any homeowner, the prospect of losing their home because they can’t make the mortgage payments can be a frightening experience. Since the Great Recession began, many borrowers have experienced problems making ends meet because of losing a job, divorce, medical issues and other situations.
In addition, during the real estate boom, it was common for borrowers to get duped into take on risky adjustable-rate mortgages (ARMs) to get into homes they could not otherwise afford. ARMs have low “teaser rates” for at least the first year. This feature helps borrowers qualify bigger mortgages.
After the introductory rate expires, the lender can adjust the interest rate on the loan at predetermined intervals, which can send monthly payments skyrocketing.