California Home Mortgage Rates - California Home Loan

California Home Loan - Feeling The Fault

Anyone applying for a California home loan today should be very comfortable and have a close relationship with three letters - ARM. You will have to apply for an adjustable rate mortgage, we're almost sure of that and its pretty much the only way to reasonably afford a California home loan in today's marketplace. And as adjustable rates they will change - and most people are guessing they will go up.

Preparing for the changes to a California home loan

So, you have your California home loan with an adjustable rate that you can manager - you can manage the monthly payments with your currently low, fixed rate that will last for about 5 years. When the five years are up however, you have to make a choice:

Sell your home
Get ready for some intense financial pressures.

Because rates are going to rise and your monthly payments are going to go up right along with them. And with California home loans this will be no minor change or small cash inconvenience you can easily take care of:

Lets say your initial 5 year rate on a $300,000 interest only California home loan was 5.5%. That means you're paying about $1,375 a month - all in interest.
The end of your fixed rate, interest only term comes to a close, and your rate adjusts to the new level of 6.5%.
Not only will your interest payments increase to about $1,625, but you'll have to start chipping away at that principal - probably to the tune of an additional $833 a month, bringing your new monthly payments to about $2458.

All at once, your monthly California home loan costs might increase by $1000. Thats a huge leap, and you have to be sure you can handle the jump in cost. Especially if you have a bad credit home loan financing your Bel Aire manse - adjustable rates can be a killer if you aren't ready.

If you can't handle the increase but want to keep your home

There is an option for you when these rates increase and the cost of your home loan skyrockets - refinancing. Some people simply keep refinance their California home loan into a new ARM ever three to five years. They never pay a dime toward the actual loan principal, which is ok - they are making more than enough through increases in equity. As long as home appreciation rates remain higher than interest rates attached to your loan, this continual refinance cycle will remain a valid way to keep your home over your head.

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