Los Angeles, CA – 04/01/23 – As interest rates continue to climb, many distressed homeowners are feeling the financial strain. Higher interest rates mean higher borrowing costs, which can lead to difficulty in making mortgage payments and even foreclosure. In this blog post, we’ll explore how rising interest rates are affecting distressed homeowners and what they can do to manage their finances.

The Impact of Rising Interest Rates on Distressed Homeowner

For homeowners with adjustable-rate mortgages (ARMs), rising interest rates can lead to significant increases in their monthly payments. ARMs typically have lower initial interest rates that adjust over time based on market conditions. When interest rates rise, the interest rate on an ARM can increase substantially, resulting in higher monthly payments that may be difficult for some homeowners to afford.

For example, if a homeowner has a $200,000 ARM with a 3% interest rate and a monthly payment of $843, a 1% increase in interest rates would result in a monthly payment increase of $113, to $956. This can be a significant burden for a distressed homeowner who is already struggling to make ends meet.

Even for homeowners with fixed-rate mortgages, rising interest rates can make it more challenging to refinance their mortgages at a lower rate. Higher interest rates mean that it will be more expensive for homeowners to borrow money, which can make refinancing a less attractive option. This can be especially problematic for homeowners who have negative equity in their homes or have experienced a decline in their credit score.