>> One issue is that many mortgages come with a 'teaser rate' -- an
>> introductory rate that lasts for some amount of time, like a year.
>> So say you got a prime+2 mortgage (when prime was 5%) with a 2% rate
>> increase cap/year and a 3.5% teaser for a year. Say you borrowed
>> $200,000. Your monthly payment at 3.5% is $898/mo. After a year, it
>> goes up to $1,135/mo (ignoring your principal decrease). After
>> another year it does the max 2% rise to to 7.5%: $1398/mo. Prime is
>> now 7.5%, so your prime+2 is hitting 9.5% or $1,681/mo ... that's
>> twice what it was three years ago, even though you've only seen a 3%
>> rise in rates.
>
OK. But then this suggests that people are either unable to do math or
that they bought to speculate on rising prices.
Probably the latter since buying a house is a BIG deal and who would do that without knowing what the cost would be three yers down the road. .....
Joanna