Asmall group of Americans who took out cheaper but riskier mortgages several years ago are about to see their monthly payments skyrocket.
Since 2019, more than 1.7 million homes have been bought using adjustable rate mortgages (ARMs), which initially offer a lower, more affordable interest rate than their fixed-rate counterparts. But eventually, ARMs reset to an unknown future rate, meaning there is a high degree of uncertainty for individuals who take on these types of loans.
About 330,000 homeowners who got an ARM in 2019 have already seen their five-year, fixed-rate term end, and another 100,000 will see their rates adjusted this year, according to ICE Mortgage Technology.
With mortgage rates settling near the highest level in two decades, the reset could cause monthly payments to surge for many homeowners.
“Interest rates went up at the fastest pace in 40 years, so buckle your seat belt,” Greg McBride, chief financial analyst at Bankrate, told FOX Business.