Many homes over the last five to seven years were purchased with a subprime adjustable rate mortgage. These loans allowed borrowers who could not normally qualify for a home loan to secure financing. While they did do good for many borrowers there are also a large amount of borrowers that are in trouble with their adjustable interest rate mortgage.
The Problem With The Subprime ARM
The major problem with this type of loan is that almost all of them were written as 2/28 ARMS. This means the interest rate was fixed for two years then adjusted every six months or year for the next twenty eight years.
Normally on the first adjustment the adjustable interest rate mortgage payment increased on average of $345 for every $100,000 borrowed. This made payments very difficult for people to make and many started to fall behind on their mortgage payments.
This was not a problem during the real estate boom when they could go out and get another subprime adjustable rate mortgage, but now that the markets have tightened up many of these home owners find they have nowhere to turn for help.
What Can You Do To Save Your Home
Because the banks actually stand to lose a lot more then consumers with the large amount of adjustable interest rate mortgage loans that face possible foreclosure they are starting to get very flexible with troubled borrowers.
Often times if you call your current lender early on and let them know you are unable or will be unable to refinance you subprime ARM they will work out an arrangement with you.
This arrangement may change the loan to a fixed rate or allow you a longer fixed rate period on your ARM. Although it is not a 100% guarantee that they will help you most banks are more then willing to assist you when you are having trouble with your adjustable interest rate mortgage.