A mortgage is a very serious financial obligation. When looking at the French origins of the word, which essentially means “death pledge,” the amount of obligation becomes obvious.
Many mortgages run for 30 years, making it a commitment that lasts for a significant portion of a homeowner’s life. For most people, a mortgage is necessary to become a homeowner, as saving enough to make a cash offer on a property is prohibitively difficult.
However, people may struggle to keep their mortgage debt in good standing if they acquire specialized mortgages. There are two types of mortgages, in particular, that have a strong association with homeowners struggling to pay each month.
Adjustable-rate mortgages
Adjustable-rate mortgages, also known as variable or floating-rate mortgages, may seem like an excellent option when initially acquiring a property. Aspiring buyers convince themselves that they can refinance in the future when rates are lower.
The problem with this approach is that there is no guarantee regarding the future of rates. They may increase, rather than decrease. Property owners may see their mortgage payments increase substantially due to the fluctuation in rates and may struggle to make their monthly payments.
Balloon mortgages
Balloon mortgages offer low monthly payments, followed by one large, lump-sum payment. After a set number of years or payments, the remainder of the balance on the mortgage comes due all at once. Property owners may struggle to refinance a balloon mortgage, especially if they do not take steps to improve their credit after acquiring the home.
Homeowners fearing that their mortgage debt could lead to foreclosure or other financial challenges may need help addressing their circumstances. Filing for personal bankruptcy can be an option for those dealing with challenging mortgage scenarios. The support and insight of a lawyer can help those with unsustainable mortgage terms evaluate their options.
