How does a apr work? and what happens with it in a upsidedown market?

Shanae
House cost 685K and now only worth 485K. Payments use to be easy with interest only, but now off the charts because of a APR. I dont understand, but my neighbor is losing there house and cant refinance for enough. What is the approx interest rate for this type of loan?

Brant
I agree 1000% with Dale H.Unfortunately, many areas of the country are affected by the mortgage crisis. It is typically a buyer's market right now, but those people that purchased homes several years ago that were able to get dirt cheap rates because they chose an ARM are now facing higher payments and higher APR because of the adjustable rate. There is nothing that can be done if you are "upside down" in your house. There is no lender out there that will refinance if you owe more than 97% (approximately) of what the house is worth, unless you plan to come to the closing table with money to cover the difference.

Cathern
If what you mean is that your neighbor is trying to refinance, but they owe more than the house is worth, there is no rate for those types of loans.The logical outcome is a foreclosure if the borrower cannot afford to make the payments at the new rate or with fully indexed payments.Sorry about their luck if that is the case.

Elden
It’s called an Adjustable Rate Mortgage or ARM. After a set period of time, often 5 years, the “teaser” or introductory rate resets, often up, raising the payment. In other words, the Annual Percentage Rate (APR) charged changes over the life of the loan.