As long as I’m making unpopular statements in this thread, I might as well go for broke…
Adjustable rate mortgages are gambling, just like playing blackjack, playing the stock market, or buying lotto tickets. If you can’t afford to play, don’t play. Get the fixed-rate mortgage.
[quote=“Gary “Wombat” Robson, post:61, topic:549225”]
Adjustable rate mortgages are gambling, just like playing blackjack, playing the stock market, or buying lotto tickets. If you can’t afford to play, don’t play. Get the fixed-rate mortgage.
[/QUOTE]
I would make exactly the same argument to the bank or other lender.
If you start hiking up the interest rates on ARMs, don’t be surprised if some of your borrowers offer you the house instead of mortgage payments.
“I’m going to lend you a million dollars, so you can buy this Stradivarius from me”
“Wow, that’s awesome, and I’ll pay you back. And since that Stradivarius is worth a million dollars, if I can’t pay you back for whatever reason, I’ll agree to give you back the Stradivarius.”
“Deal.”
“Deal.”
<signs>
“Wait a minute, this isn’t a Stradivarius, you just wrote Stradivarius on the back of a thrift store violin with a Sharpie.”
“Deal’s a deal. Pay me my million dollars.”
“No, I’ll just give you the collateral instead. Here’s your violin.”
“But that’s cheating! You LIED to me! You are a horrible, horrible person!”
[quote=“Gary “Wombat” Robson, post:61, topic:549225”]
Adjustable rate mortgages are gambling, just like playing blackjack, playing the stock market, or buying lotto tickets. If you can’t afford to play, don’t play. Get the fixed-rate mortgage.
[/QUOTE]
Well, maybe. But for a 1st time homebuyer, if their bank and their realtor all suggest a ARM, then how are they to know that it’s such a gamble?
[quote=“Gary “Wombat” Robson, post:61, topic:549225”]
As long as I’m making unpopular statements in this thread, I might as well go for broke…
Adjustable rate mortgages are gambling, just like playing blackjack, playing the stock market, or buying lotto tickets. If you can’t afford to play, don’t play. Get the fixed-rate mortgage.
[/QUOTE]
ARMs started to be popular in the early 1980s when mortgage interest rates were well over 10%. Back then ARMs were a bet that interest rates were heading down, which they did, and way not to get locked into a historically high interest rate. There were teaser rates, but not outrageously low ones. They were not used to get people into homes they could not afford. I admit having them for a few years, and my interest rates never went up. I switched into a fixed rate mortgage when rates stabilized, and have a fixed rate one now. So there are situations where they make sense - but 2007 was not one of them.
Hmm. I think it would go more like this:
“I’m borrowing 10k dollars from you to buy this Ultrafractor Strasburg card, and if I can’t pay, you can have it!”
after checking e-bay, various sources, and having an appraisal signed and witnessed by a notary “Sure!”
after Strasburg gets injured and the value of the card drops to $200 “I’ve decided to renege on the deal since the card isn’t worth 10k anymore. Here’s the card, thanks for playing!”