Subprime and Adjustable Mortgages

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Sometimes, when people buy a home for first time, they usually get subprime mortgage rates. Lenders grant these types of rates are to borrowers whom their credit history is not sufficient to get a typical mortgage. Sometimes, these borrowers have bad or even insufficient credit history. Subprime mortgages regularly offer loans that are interest only. These loans, that are “interest-only,” are easier for buyers to afford. When you get one of these loans, the lender does not require you to pay any of the principle for the first few years of the loan. Sometimes, borrowers think that they will refinance their loan before they have to pay the principal and the monthly payment start to increase. When they cannot refinance their loans, they,…show more content…
This adjustment on their rates can increase the buyers’ payments up to 100%. These adjustments, on their rates, make their mortgage payments impossible. We can accredit this crisis to many factors that exist in housing and credit markets. Some of the causes are that homeowners unable to make their mortgage payments because of the adjustable-rate mortgages resetting, borrowers overextending their payments, greedy lenders, high risk mortgage products, high debts on personal and corporate levels, bad financial and housing policies, disproportion of international trade, and badly chosen government regulation.
In addition, members of the market were looking for “higher yields” without realizing the risks and did not do proper research on the real estate industry. Meanwhile, insubstantial financial standards, unreliable preparations of risk management, and gradually complex and not clear financial products together created some weaknesses in the real estate system that led to the so-called “subprime mortgage crisis.” These are some of the causes of the subprime.
The effects of the subprime mortgage have been felt, in the United States, in different ways. It had a negative final impact in the United States, and it created many foreclosure issues. The financial sector felt the crisis around February 2007. In this year, HSBC the “The Hong Kong and Shanghai Banking
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