Thousands of homeowners are about to get slammed with higher monthly payments

Last year, a homeowner in Houston was surprised to receive a notice that her mortgage payments would increase by about $2,000 per month. The homeowner had refinanced her home loan in 2016 using an adjustable-rate mortgage (ARM) loan, which has a low introductory rate for a fixed initial period. Unlike fixed-rate mortgage loans, ARMs offer temporary relief from higher mortgage rates but come with the risk of rates adjusting after the fixed period. With mortgage rates remaining elevated, many ARM loan holders are now facing significantly higher monthly payments. According to data, a large number of homeowners who bought homes with ARMs will see their monthly payments increase this year. While ARMs gained a bad reputation after the subprime mortgage crisis, the share of homebuyers using ARM loans has doubled in the past four years. Experts suggest that ARMs may make sense for homebuyers who are comfortable with the risk of interest rate increases or those planning to move or refinance before the fixed rate expires. However, it’s crucial for borrowers to closely monitor the details of their ARM loans to avoid unpleasant surprises.