The Globe has a story out today about people facing higher home loan payments over the coming 18-months due to resetting adjustable-rate mortgage loans.

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“I don’t know how I’m going to survive,” said Sana Masoud, a single mother facing a $600 a month increase in one of two mortgages she obtained to buy a two-family house in Brighton for $712,000 in 2004.

That mortgage will reset on Dec. 1 to 7 percent, from 6.125 percent, pushing up Masoud’s total monthly housing costs to $4,350. She rents the second unit for $2,400 and earns $63,000 a year as a computer programmer. But her income will not be enough to cover the mortgage and other expenses, such as property taxes, college tuition for her eldest daughter, and ongoing medical bills for her youngest daughter.

Well, there’s a little bit more to this story.

This owner had leveraged her investment property to the hilt, from the very beginning.

Let’s do the math. Ms Masoud purchased her two-family property in 2004 for $712,000. Her first mortgage loan was for $569,600 (information courtesy of the Suffolk Deeds Registry of Deeds).

I see that the owner took out a second loan at the same time; in 2004, she borrowed $100,000, and in 2006 she paid it back and took out another loan, taking out $103,200; it’s unclear what the monthly payments are on this loan.

Payments on her first loan, based on the stated rate of 6.125%, were approximately $3,462 per month.

Meanwhile, her annual property taxes are around $7,200, or $600 per month (information courtesy of the City of Boston Assessor).

Plus, she probably pays another $600 a month toward the second loan.

Hmmm. Based on my calculations, Ms. Masoud is already responsible for payments of $4,800 per month. The Globe says she isn’t; I’m not sure the discrepancy, but it could be that the difference is due to my including property tax payments.

Making things a little bit better, the owner has been collecting $2,400 in rent, each month.

So, based on my calculations at least, Ms Masoud is paying $2,262 per month in housing costs – $3,462 is first loan, $600 is second loan, property taxes of $600, minus $2,400 in rent.)

Her monthly gross income is $5,250, her net is probably around $3,800. Her currently housing expense is approximately 43% of her gross income ($2,262 / $5,250) and 57% of her take-home income.

Starting in December when her first loan resets to 7.0%, her new first loan payment will be $3,790, a difference of $328.

Meaning her monthly housing expense will then be $2,590 – $3,790 for the first loan, $600 for the second loan, $600 in property taxes, minus $2,400 in rent.

This is 49% of her gross income and 68% of her net income.

Well, now I understand her concerns. If I was facing that situation, I’d freak out.

My opinion? Her problem is exacerbated by the higher interest rate, but not caused by it. She already had a problem.

Ms Masoud, you need to sell your property. Now.

Thousands brace for mortgage rate jump – By Kimberly Blanton, The Boston Globe

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Updated:  1st Q 2018

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