Should I Let My Arm Mortgage Go Into Foreclosure?

The monthly payment on an ARM changes according to interest rates.

Foreclosure Ruins Your Credit.

Allowing an adjustable rate mortgage to go into foreclosure may seem like a tempting option for a homeowner whose monthly payments have skyrocketed. However, this is not always the wisest choice. A foreclosure can drop a homeowner's credit by 250 to 300 points and it stays on his credit report for as long as ten years afterwards.

There Are Other Options.

The Federal Trade Commission offers several options for homeowners who cannot make their mortgage payments. The site suggests asking the lender for a reinstatement or a repayment plan. Other possible options include refinancing as a fixed-rate loan, executing a short sale or requesting a deed-in-lieu of foreclosure.

Bottom Line

In the end, a foreclosure is one of the worst things a person can do to their credit. Sometimes a foreclosure is unavoidable, but it should be a last resort and should only be considered after every other option has been completely exhausted.

References

• Distressed Property Institute: Foreclosure vs. Short Sale
• Federal Trade Commission: Mortgage Payments Sending You Reeling? Here's What To Do