Homeowners feel pinch of mortgage rate

• Article
• Comments ()
• Click-2-Listen
• Videos

By

Robin Vinopal decided to follow the advice of a financial adviser five years ago when she bought a home in Kensington with an adjustable-rate mortgage.

Now she wishes she had ignored his advice.

"I just hit the first adjustment up, and it's painful," said Mrs. Vinopal, a director of operations for a College Park games manufacturer.

Like other borrowers who tried to save on monthly payments with an adjustable-rate mortgage (ARM) or interest-only loan, Mrs. Vinopal is finding that her payments are rising with interest rates.

ARM rates were lower by one percentage point or more compared with the traditional fixed-rate mortgages until about a year ago.

Interest rates on ARMs change with market fluctuations but stay the same on fixed-rate mortgages.

Although ARMs make up 25 percent of home loans nationwide, they accounted for 42 percent of mortgages last year, according to the Mortgage Bankers Association, a trade group for mortgage lenders.

They hit a height of popularity while interest rates were low during the housing boom, when home ownership hit a record 69 percent in 2004.

However, in some cases the American dream was built on unrealistic promises of easy loan-repayment terms.

Now the easy part of the loan is over as rising interest rates create bigger monthly payments.