Homebuyers turn to riskier adjustable-rate mortgages – NBC Bay Area

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As mortgage rates remain above 7%, some would-be homebuyers are looking for another option to help them buy: an adjustable-rate mortgage.

Instead of a fixed-rate mortgage where you’re locked into a rate for the duration of your mortgage, an adjustable rate is one that can change as overall rates move, which means your monthly payment could go down over time, but it could also go up.

Those buying houses now are, according to Silicon Valley agent Linsey Gridley, choosing the adjustable rate more frequently than at any time during the last several years.

“They feel hopeful, they’re in the job market, they know what’s happening on their local economy scale,” Gridley said. “They feel confident in their jobs, their situations, their local investment into the real estate market.”

While the average fixed-rate mortgage stands at 7.29%, the average adjustable rate is 6.6%. But it can be much riskier.

“An adjustable rate at this point in time is a little bit like playing the lottery,” San Jose State University business Professor Caroline Chen said.

If rates drop, your monthly payment drops, too. But if rates rise, so does your payment. Those getting adjustable rates are banking on that future drop.

“I mean, you could really be riding a rollercoaster for an extended period of time,” Chen said. “And you may want to ride that rollercoaster in all honesty because if it’s lower than what you originally locked in at, then that’s to your benefit.”

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