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How long does it typically take for the payments on an interest only loan or adjustable rate loans to increase? Many homes that are on the market were bought in 2005, so is it safe to assume that it takes 3 years for the payments to increase? Does that mean that their is still a wave of selling to come from the people that bought in 2006? when did the adjustable rate/ or interest only mortgage mess stop? was it 2006? so can we calculate 2009 to be an end to the wave of houses to come on the market?

7 Thoughts on when do adjustable rate loans or interest only loan payments increase?
  1. Reply
    bob shark
    February 11, 2014 at 1:13 am

    interest rate adjustments vary according to each contract.

    But in General, The biggest amount of mortgage re-adjustments come between Feb and Jun 2008

    Then the amount starts getting less as time goes by.

  2. Reply
    Gotta B. Covered
    February 11, 2014 at 2:11 am

    This is really a very good question to ask! As a Realtor, I truly wish I had a crystal ball that told me the exact day that things will change for the better. I think people were still getting those loans back in late 2006 and depending on the terms of the loan, the adjustment may not kick in until 5 years after the loan was originated. With that info, I would only be guessing but 2011/ 2012 should be the ending years of this mess.

    Now the problem that is not going to help is it appears we may be sliding into a recession. Boy, when will the fun stop?

  3. Reply
    February 11, 2014 at 2:21 am

    The interest rate on a payment-option ARM is typically very low for the first 1 to 3 months (2%, for example). After that, the rate usually rises to a rate closer to that of other mortgage loans. Your monthly payments during the first year are based on the initial low rate, meaning that if you only make the minimum payment, it may not cover the interest due. The unpaid interest is added to the amount you owe on the mortgage, resulting in a highter balance. This is known as negative amortization. Also, as interest rates go up, your payments are likely to go up.

    Many payment-option ARMs limit, or cap, the amount the monthly minimum payment may increase from year to year. For example, if your loan has a payment cap of 7.5%, your monthly payment won’t increase more than 7.5% from one year to the next (for example, from $ 1,000 to $ 1,075), even if interest rates rise more than 7.5%. Any interest you don’t pay because of the payment cap will be added to the balance of your loan.

    Payment-option ARMs have a built-in recalculation period, usually every 5 years. At this point, your payment will be recalculated (lenders use the term recast) based on the remaining term of the loan. If you have a 30-year loan and you are at the end of year 5, your payment will be recalculated for the remaining 25 years. The payment cap does not apply to this adjustment. If your loan balance has increased, or if interest rates have risen faster than your payments, your payments could go up a lot.

    This is a great information packet on this:

  4. Reply
    Craig Dowling
    February 11, 2014 at 3:07 am

    Every loan is different. There are adjustable rates from 1yr all the way to 10 years. That means it could be 10 years before the first adjustment. Most people especially in the sub prime market are in a 2 or 3 yr fixed rate however if they have interest only on these loans some of the i/o payments won’t adjust until 5 years. I/O payments can be set for 10 years as well. it all depends on who is the lender and how the NOTE was drawn up at settlement. We do know this. We havent seen the worse yet.

  5. Reply
    Curtis B
    February 11, 2014 at 3:35 am

    Good finance question! I know of an organization that gives up to $ 1500 to people to help them with their rent or mortgage. It’s available in most US cities, I highly suggest you check it out.

    Best of Luck.

  6. Reply
    February 11, 2014 at 4:11 am

    This depends on the terms specified in the Adjustable Rate Mortgage Rider that is a part of the actual mortgage note. Rates can adjust every month, 3 months, 6 months or every year after the fixed rate period has elapsed.

    If you’re looking for a comprehensive and balanced solutions to your financing needs feel free to contact me at We are licensed in all 50 states and specialize in TAX FREE mortgages in the state of New York.

    Best Regards,

    J. Polanco
    Financing Advisor
    Robbins and Lloyd Mortgage Corp.
    347 5th Avenue, Suite 1506
    New York, New York 10016

  7. Reply
    sacha F
    February 11, 2014 at 4:14 am

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