Option adjustable rate mortgages (ARMs) give would-be homeowners a way to purchase a big house with only a small payment. They also give current homeowners a way to reduce their mortgage payments. While these benefits may seem to be just what the doctor ordered following years of rising prices in an overheated housing market, BusinessWeek magazine has labeled option ARMs "Nightmare Mortgages." In the September 2006 article that sported that name, BusinessWeek stated that the option adjustable rate mortgage might be "the riskiest and most complicated home-loan product ever created."
The truth about whether option ARMs are a useful tool or a ticket to trouble is largely a matter of personal perspective. A closer look at these controversial loans will make easier to determine their prospective uses - and the risks involved.
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