I wouldn't bet my firstborn on such a proposition. It's the (short-term) low rates recently that have got so many homebuyers into trouble, when, after the initial term of the contract expired, and the rate increased rather drastically, judged that there was no way that they could afford those payments. With many such houses being put up for sale, house prices have been suffering some substantial drops in a number of markets. In many cases, the only price that will entice buyer interest is one lower than the amount still owing on the loan. So many who can't afford the higher payments, and can't sell the house for enough to pay off the mortgage ... just walk away. They might be better off trying hard to sell the house themselves, for the associated expenses will usually be lower than if the financial institution must foreclose, then sell it, and the possibility is that the owner can get a higher price than the financial institution. If the lender can find the former owner, and it's getting increasingly difficult to hide, that owner will almost certainly be presented with a bill for the difference, plus the costs associated with the sale. Not a pleasant situation. ole joyful

devorah, yeah you have a point. That is always a possibility, but that's why we also have the emergency fund- it's a road I hope we don't have to take. At present he's in a job he doesn't love, but it is relatively secure. At our current payoff rate it will be just a few more years with a mortgage and then he will be free to take chances with other jobs that may not be as secure. I should also mention that in addition to prepaying the mortgage, we are continuing to save for retirement as well as for short term goals (new appliances, unforseen repairs, etc.) When the house is paid off, it will mean a substancial chunk of expendable income coming our way each month- even taking into consideration taxes, insurance, and additional monies that will be earmarked for retirement accounts. The way we looked at it was to struggle very hard for a few short years, and have the stress of a house payment removed rather than having larger demands of both mortgage and retirement hanging over our heads for 30 years. I should probably also mention that we are beyond the point where we are able to deduct the interest- so no tax break for us there to offset the amount of interest needed to break even. I don't expect others to fully understand the method to our madness- there are so many more facets to it beyond just that. It's a personal decision based on current circumstances, hopefully the right one for us. Now that I think about it, I've never heard someone say they were sorry they paid their house off early... Sorry to get so wordy- I've been sitting on hold with an insurance company for 30 minutes....

What are the different types now? Are they radically different then what it was five years ago? The market has changed drastically with all the failures and write-offs. We are now looking for a second home, and have the 20%+ cash for the downpayment [not subject to the sale of our first home]; this time we are thinking of either a 7/1 ARM or a 30- year fixed, maybe pay a point or so, and some closing costs. When I last looked for mortgage, in 2004, it used to be 30- or 15- years fixed, or libor based ARMS such as 3/2 and 5/1, and often piggyback with a HELOC loan. We ended up financing it that way, 80% 5/1 ARM at 4.375, 10% HELOC at prime and 10% downpayment, but we rolled the closing into a no-closing-cost loan since we were cash strapped. We paid off our HELOC very aggressively, so didn't lose much money once the rates increased. Just don't know what I should be avoiding now, or seek out. What indexes are the ARMs mostly tied to? In 2004, it was very difficult for me to find an ARM tied to naything but the LIBOR. Is that still okay for an ARM, or should I be looking at something else?

They'll sell your mortgage, and send you a letter to that effect along with payment instructions. Unless you hear anything else, I suggest you send your payments as usual.