Caution over exotic mortgages expressed
Exotic mortgages are causing a great deal of concern. In the last two to three years, especially in many parts of Nevada, California, and Florida, all types of buyers have been turning to exotic mortgages — interest-only and option adjustables mortgage products — that allow them to buy more house with fewer financial resources. In fact, a recent press release stated that 61.3% of Nevadans have an exotic mortgage. What’s the problem?
The problem according to Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard is that, “Although interest-only and adjustable loans can initially save a typical home buyer hundreds of dollars in monthly payments, these loans also leave borrowers vulnerable to sharply higher payments when interest rates adjust or principal payments start to become due.”
“With the number of borrowers vulnerable to payment shocks up, default rates predictably several times higher for subprime than prime loans and house prices growing at such rapid rates, the housing market could deteriorate if the economy softens or if rates increase sharply,” he said.
For more information, contact MillionSaverHomes.com a local Las Vegas real estate broker at 702.212.3513.
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