Nearly Half of All Homebuyers Who Took Out Adjustable-Rate Mortgages Regret Their Decision

A recent survey by U.S. News & World Report reveals that 43% of homebuyers who took out an adjustable-rate mortgage (ARM) in 2022 regretted their decision, Realtor.com reports. ARMs offer buyers a fixed mortgage interest rate that is typically lower than a 30-year fixed-rate loan, for a period of several years. The rate then resets, usually annually, to match interest rates at that time.

Of roughly 1,200 borrowers with an ARM who participated in the survey, half said that they opted for an ARM because the introductory rate was lower than those on fixed-rate mortgages, while more than half opted for an ARM with the plan to refinance or sell their home before the rate began to adjust. As rates continue to rise at the start of 2023, those borrowers are now second guessing their decisions.

And while no one has a crystal ball, it is a safe bet that interest rates will eventually fall. However, Realtor.com is forecasting a 7.1% rate for the 30-year fixed by the end of 2023.

“One of my concerns is that there still is a big set of people who don’t plan on selling or refinancing before their reset period expires,” says Erika Giovanetti. “ARMs take a lot more research and work, not just while you’re borrowing one, but throughout the course of the loan. … For the average homebuyer who doesn’t want to get involved with understanding the rules and the rate adjustment schedules of an ARM, maybe they should consider a [fixed-rate mortgage].”

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