Melida

Adjustable Rate Mortgages (ARM) are the reason that Connecticut homeowners are facing the highest foreclosure rates that we have seen in recent memory.

Okay don't zone out on this part, but generally, ARM's determine what you must pay based on an outside index, perhaps the 6-month Certificate of Deposit (CD) rate, the one-year Treasury Security rate, the Federal Home Loan Bank's 11th District Cost of Funds Index (COFI), or others. They may adjust every six months or once a year. Lenders view this favorably because they know that you will have to refinance sooner as opposed to later and the interest rates that they pay on the money that they borrow to lend to you is also favorable.

While most programs have a cap that protects you from your monthly payment going up too much at once, the cap will not matter if you can't qualify for another loan because the lenders have gone out of business. Additionally, there may be a cap on how much your interest rate can go up in one period -- say, no more than two percent per year, even if the underlying index goes up by more than two percent. But be sure that you do the math using a Connecticut mortgage loan calculator on that percentage increase because it can mean hundreds of dollars a month. The saving grace of most ARM's are what's called a lifetime cap -- your interest rate can never exceed that cap amount, no matter what.

When you compare your current Connecticut mortgage rate on your Adjustable rate mortgage you will often that mortgage lenders have their lowest, most attractive rates at the beginning of the loan, and can guarantee that rate for anywhere from a month to ten years.

However, you still have to refinance at the end of that period and with the market being in the turmoil that it is you don't know if your bank will be around.

The solution to this problem is the FHA loan.

With a FHA loan you can have a 30 year fixed loan with a interest rate in the six or seven percent range and you will have assistance if you hit a tough patch and need a break on a couple of payments.

While you might choose an ARM to take advantage of a lower introductory rate and count on either moving, refinancing again or simply absorbing the higher rate after the introductory rate goes up, in this market that can mean the difference between losing your home and having the lifestyle that you desire. You don't have to take that risk when you can take advantage of a federally backed mortgage that will give you the stability and monthly savings you need.

Chris Rivers, a Connecticut mortgage broker, specializes in offering low interest rates for Connecticut refinance mortgages after bankruptcy even if you have 30, 60 or 90 day lates on your mortgage and late payments on other accounts. When you need to refinance your Connecticut adjustable rate home mortgage into a fixed rate mortgage with great credit scores then use a Connecticut FHA Mortgage.

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