Large numbers of buyers have taken advantage of adjustable rate mortgages during the last several years. The true cost of these adjustable rate mortgages is not always readily apparent because most start out with a fixed rate for the first few years and then have an annual cap on how much the interest rate can adjust when it becomes adjustable. However, even the best will leave you with about a 7.5% rate after they reach their full adjustment and many will take your interest rate to over 10%!

Thirty year fixed rate loans are available at around 6.125% to 6.25% for borrowers with good credit.

Declining property values can easily prevent you from refinancing if your debt exceeds the lender's guidelines. The median Yuba City home price has declined over $55,000 since last November (from $352,950 to $297,500). That is a decline of over 15% in 10 months. Our Yuba City Market Value Index has declined nearly 14% since last September.

The message here is clear. Unless you are independently wealthy, if you have an adjustable rate mortgage you should be investigating converting it into a fixed rate loan before declining real estate values prevent you from doing that.

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