Applying for a mortgage takes a lot of research and definitive action to know what you want. As home prices have soared in recent years, fixed-rate 30-year mortgages have lost popularity.

During the housing boom from 2000 to 2005, everyone was trying to get into the industry and buy a property. While many people did not have the necessary finances at the time, they began taking out optional mortgages with adjustable rates so they could pay less now with the prospective of paying more later.

Since many people expected to earn more from their occupations a couple years after signing a mortgage, this adjustable rate mortgage made sense.

The article, “Survey: 14% of homeowners hold adjustable-rate mortgages” posted on the October 30, 2006 edition of Inman News, explains how many people with adjustable-rate mortgages (ARMs) are either refinancing to fixed rates or planning to face the consequences.

“One in seven homeowners has adjustable-rate mortgages, and 79 percent are concerned about the interest rate on their mortgage increasing, according to a survey of 1,361 homeowners who closely mirror the U.S. population.”

The survey, conducted in August for Wells Fargo, discovered that 56 percent of borrowers with an ARM expect to refinance when their interest rate resets after a predetermined amount of time, while 21 percent of ARM holders plan to take no action.

“The young and those with higher incomes were the most likely to hold an ARM, the survey found. Among 18- to 29-year-old homeowners, 27 percent had an ARM, compared with 19 percent of 30- to 41-year-olds.”

This statistic makes sense because young people like the lower initial payments to afford their first property, while those with higher incomes are likely to be investors who plan on selling the property before the rates adjust.

Although 90 percent of homeowners surveyed expressed no concern that the value on their property would decrease, many other economists predict the downturn to continue into 2007.

What happens to the housing market is important to ARM holders because if the rates adjust to higher monthly payments, defaulting could become an issue.

Home foreclosures have already been rising steadily throughout the country, with Colorado experiencing the highest percentage of foreclosures among the states.

“‘This survey finding suggests that homeowners are seeing the conditions of their local housing markets and concluding that it is more likely that price declines will be moderate not steep,’ said Doreen Woo Ho, president of Wells Fargo's Consumer Credit Group, in a press release. ‘There is a divergence of opinion among housing market experts today on how much prices might adjust. This survey data gives credence to those who hold the view that we're more likely to have stability over time.’”

Nearly 75 percent of homeowners view their equity as an important part of their investment portfolio; eyes are open wide when the time comes for rates to adjust. They do not want to get caught missing the adjusting date only to find their monthly payment has increased by a couple hundred dollars.

“Younger homeowners were more inclined than the older generations to view real estate as an important investment in their financial portfolios. Among homeowners 18 to 29, 44 percent said real estate was an important investment, compared with 32 percent of those 42 and older.”