Re-Refinancing, and Putting Off Mortgage Pain

It is the latest twist in the gravity-defying world of the high housing prices and exotic low-rate mortgages: As monthly payments on [tag]adjustable-rate mortgages[/tag] are starting to balloon, many Americans have found a way to put off the day of reckoning. They are [tag]refinancing[/tag] with new adjustable-rate mortgages that keep monthly payments low — for now, that is, though their payments will likely rise even higher in the future.

Typically set at artificially low rates in the first years of the loan, these mortgages are then reset at the prevailing interest rates. For borrowers, the bet was that interest rates would remain low. Now, the first big wave of the mortgage boom is cresting as more than $400 billion worth of adjustable-rate mortgages, or about 5 percent of all outstanding mortgage debt, will readjust this year for the first time, according to Loan Performance, a research firm. Next year, another $1 trillion in loans will readjust. When that happens, for instance, a typical borrower with a $200,000 A.R.M. could see his monthly payments increase nearly 25 percent when the A.R.M. adjusts from 4.5 percent to 6.5 percent. In total dollars, that is an increase from $1,013 a month to $1,254.

click here for article