Question:

What is payment shock?

Answer:

Borrowers who took option ARMs and paid only minimum payments learn what is payment shock by experience, unfortunately. This term refers to the shock a borrower experiences, when they find how much their ARM rate and mortgage payment will go up after a low rate, fixed period is over.

Minimum payment options result in negative amortization, and not only borrowers have to pay fully amortizing payment after the set period expires, but they also owe more than they borrowed.

How to avoid mortgage payment shock?

The only way is to educate yourself before you plunge into a home loan agreement you don't understand.

If you are afraid you can't take a mortgage on your own, contact an attorney and use their services to avoid future surprises on ARM payments.

ARMs and subprime loans are the types of loans causing most of the borrowers trouble. However, in the hands of educated and experienced consumers, these are very powerful loan options to use for investment purposes and maximizing cash flow.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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