Tired of Sub-Prime News Yet?

Well, it's the story three years in the making.  Hope you're not bored by it yet.

The latest chatter in markets is how rising sub-prime mortgage defaults will create additional home supply via the foreclosure process, thus kicking the housing market's rebound clear in the shins.

Weak housing leads to weak spending and the U.S. economic engine starts to sputter.

Look, folks.  The sub-prime story is everywhere and there's a lot of talk on both sides of the aisle. 

The truth is that there are more questions than there are answers right now, and it will take months (or years?) to find out just how big of an impact the sudden sub-prime market implosion will have on housing and on lending standards.

My advice is free, so take it for what it's worth, but current sub-prime borrowers with adjustable-rate mortgages should call their mortgage lenders and ask about remortgaging the home into a fixed rate mortgage while products are still available. 

Think of it like playing from the deep sand. Sometimes, you're better off playing it safe by taking a drop.  It's better to lose one stroke and get a good lie than to risk two or more shots in hopes of a look at the green.

Metaphor over. 

Yes, by switching to a 30-year fixed mortgage, the monthly payment will be higher.  But at least you can go to bed each night and know what your worst-case payment scenario is going to be for the next 30 years. 

Your payment will never be worse than it is on the day you close.

Meanwhile, if credit profile your improves over the next several months or years, you can always remortgage into a different home loan with more favorable terms.  But, at that point, it will be a choice for you -- you won't have to do anything.  Your mortgage, remember, is a fixed-rate mortgage and your payments are unchanging.