How You Can Handle Rising Mortgage Payments Of Adjustable Rate Loans or 'Interest-Only' Loans

The home mortgage refinance markets have been a boon to the ecomony these past few years. But there are signs that the housing market and home owners are in for some rude awakenings soon.

USA Today reports that in 30 major US metro markets, the cost of homes have doubled since 2000. Affordability is out of reach. A recently released survey by the National Association of Realtors notes that one in two Americans now fear that rising monthly house payments, and not the high downpayments, are the chief reason they cannot afford to buy a home. Further, 33% of survey respondents says that rising monthly payments, including spiraling energy costs and increasing property taxes, may eventually force them to sell their home and purchase a less expensive home.

A federal report says that 76.4 percent of all American households carry some sort of debt. 46.2 percent of households have some credit card debt. But it's the subprime mortgage mess that promises to drag down the American economy if it cannot be contained.

The Federal Reserve published a brochure detailing the in's and outs of interest-only mortgages that is important reading. It can be found online at:
http://www.federalreserve.gov/pubs/mortgage_interestonly/ . This is helpful advice.... better read BEFORE you've bought a home using an interest-only loan rather than AFTER, but still very good information to have in hand.

Other news media are putting spotlight on national credit issues affecting Americans across the USA.

From the naplesnews.com website:

"Housing market turning into buyer's market, sources say" By Jessica Waters

Home buyers in South Lee County come in two breeds: first time buyers, and everyone else.

"There are more and more first-time buyers," said mortgage broker Mark Ford of Gulfside Mortgage in Bonita Springs. " I see more of them coming along, but the problem is there is no affordable housing for them to move from a rental into."

Both Ford and real estate agent Paula Carhart see that changing in the near future...

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Read rest of this credit score story here...

Many experts note that "easy entry" or "interest only" loans have allowed consumers to buy more home than they really could afford. And now that interest rates are rising, or their initial, low-interest entry rates are being edged up, some predict that foreclosures could start rising.

About the only thing that will help people who are being squeezed by spiking home mortgage costs would be rising wages -- and that seems unlikely.

So if you fall into this group of home owners who are wondering what to do, here are some options to consider:

1. Sell your home now. Downsize to a smaller home, or rent. You may have fallen victim to "irrational exhuberence," but the party is soon over, and it's time to sober up and get out before you have no good options.

2. Consider increasing your income with a home-based business or by taking on a second job to compensate for rising home payments.

3. Maybe it's time to take in a renter. Being a landlord is the best way to test your nerves and patience, but at least you'll have a little extra income coming in each month (if you find a good renter, that is) to offset the higher mortgage payments.

4. Take out a debt consolidation loan. Actually pay off and eliminate credit card debt to keep your monthly outgo less than your monthly income. Then use what you once spent on credit card payments on your higher mortgage payments.

5. Make hard decisions about what you actually have to spend money on! Do you need that magazine subscription or that travel club membership? Do you need that daily trip to Starbucks? Do you really need that 4-wheel drive truck that's never been off the pavement? Do you need to keep adding to your wardrobe, even though your bedroom closets are bursting at the seems? Is your computer REALLY obsolete, or can you make it last another year? Being able to carefully spend money on triffles and small drains on your household budget allows you to keep up with rising mortgage payments.

6. Keep focused on improving your credit report to the point where you can lock in a lower interest home loan to avoid being victimized by the rising rates of an adjustable loan. It takes time, prompt payment of bills, and a commitment to keep loyal to your debt relief plan that will not only lift you out of debt, but will also reward you with a higher credit score.

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