SOUTHFIELD, Mich., June 7 /PRNewswire/ -- Sixty-seven percent of metroDetroit homeowners are currently unsatisfied with their non-traditional mortgage and intend to refinance into a traditional mortgage. Non-traditional mortgages include adjustable rate, interest only or reverse mortgages. This finding is according to the 2007 RE/MAX Housing Study, which surveys Oakland, Wayne, Macomb and Monroe county residents.
During the real estate peak a few years ago, the low adjustable rates made it easy for people to buy a home, often one that they could not afford otherwise, but now many of those interest rates are increasing. And the mortgage is not the only increase in cost homeowners are seeing, as credit card interest rates, energy costs and gasoline costs have also risen substantially.
"It is very important for homeowners not to stretch themselves too far financially when purchasing a home," said Jeanette Schneider, vice president and regional director of RE/MAX of Southeastern Michigan. "The mortgage is a product. Consumers should compare all costs involved, including your own intentions for the length of time you plan to live in your home, to help you make the best mortgage decision."
RE/MAX cautions that while adjustable rate mortgages often begin with a lower interest rate, and thus lower monthly payments, they often rise much more quickly than expected and can leave a homeowner in a money crunch. Know how much of a down payment you can afford, and find out all the costs involved in the loan. Knowing the amount of the monthly payment or the interest rate alone is not enough.
"A fixed rate mortgage holds a stable interest rate," says Schneider. "For the buyer that means knowing your monthly payment will not change for the length of the loan, unless you decide to refinance. This makes for an easier guide for financial planning."
RE/MAX recommends obtaining quotes from multiple mortgage lenders to make sure you are receiving the best price available.
A fixed rate mortgage will usually be for a term of 15 or 30 years, and the interest rate will stay the same for the duration of the loan. An adjustable rate mortgage (ARM) means that after a term, usually three or five years, the interest rate can change, and it usually increases. If an individual does not plan on staying in the home for the long term, a five-year ARM might be a good choice. Otherwise, ARMs tend to be more costly over the long run.
For example, a three-year ARM on a $200,000 mortgage at 4 percent leads to a monthly payment of $955. After three years, if the rate can jump to as high as 7.6 percent, the monthly payment actually increases 44 percent to $1,375.
According to the Mortgage Bankers Association, nearly 25 percent of mortgages, or 10 million, carry adjustable interest rates. And about one in five homeowners with a high interest, or subprime, ARM was at least 30 days late in payment at the end of 2006. After 90 days, the threat of foreclosure looms.
Study Background
The 2007 RE/MAX Housing Study, conducted by W.K. Greene and Associates of Royal Oak, Mich., was designed to establish a baseline understanding of RE/MAX of Southeastern Michigan's service area, which includes residents in Oakland, Wayne, Macomb and Monroe counties.
About RE/MAX of Southeastern Michigan
A leader in the metroDetroit real estate market, RE/MAX of Southeastern Michigan has more than 1,082 sales associates in 57 offices serving the region. RE/MAX of Southeastern Michigan has been helping thousands of Michigan families with their home buying and selling needs. For more information, visit http://www.remax.com/.
The RE/MAX franchise network, now in its 34th year of consecutive growth, is a global real estate system, operating in more than 67 countries. More than 6,500 independently owned offices engage 120,000 sales associates who lead the industry in professional designations, experience and production.
RE/MAX
CONTACT: Kelly M. Herwick of John Bailey & Associates, +1-517-316-0210;
Jeanette Schneider of RE-MAX of Southeastern Michigan, +1-248-440-0404 x202
Web site: http://www.remax.com/
