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Definition of 'Payment Shock'
The risk that a loan's scheduled future periodic payments may increase substantially. Payment shock can be the result of several things, including the expiration of an initial or temporary start interest rate (sometimes known as a teaser rate), the end of a fixed-interest rate period, the end of an interest-only payment period, an increase in an adjustable-rate mortgage's fully indexed interest rate or the recasting of a payment option ARM.
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Investopedia explains 'Payment Shock'
Many popular mortgage products, such as payment option ARMs, carry a great deal of payment-shock risk. Consumers are drawn to these mortgages because of the relatively low initial monthly payments they offer. All financial decisions, including the choice of a mortgage, should be made by carefully considering the risk versus the reward. Risks must be identified and measured through insightful analysis. When risks, such as payment shock, are recognized and measured, they can be managed or avoided.
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Search results for 'Payment Shock'
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http://www.investopedia.com/articles/pf/07/mortgage_decision.asp
... of Mortgage Risk There are two primary risks associated with the choice of a mortgage
that should be identified and measured: the risk of payment shock and a ...
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http://www.investopedia.com/articles/pf/07/subprime.asp
... 2. Payment Shock If the mortgage cannot be refinanced as planned before the end
of the fixed-interest rate period, there is a high probability that the fully ...
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http://www.investopedia.com/articles/pf/07/mortgage-payments.asp
... very risky. Adjustable-rate interest-only and negative amortization mortgages
are subject to a great deal of payment shock risk. In ...
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http://www.investopedia.com/university/mortgage/mortgage2.asp
... see Mortgages: Fixed-Rate Versus Adjustable-Rate.) Cons One of the biggest risks
for a homebuyer with a variable-rate mortgage is payment shock, which happens ...
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http://www.investopedia.com/university/homebuyers-walkthrough/homebuyers-walkthrough4.asp
... payments. A disadvantage to variable-rate mortgages is the payment shock
that can happen when the interest rate increases. These ...
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http://www.investopedia.com/articles/economics/08/credit-shock-mortgages.asp
... November 19 2008 | Filed Under » Economics, Insurance. A credit shock occurs when ...
for traditional mortgages (by having a 20% minimum down payment) turn to ...
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http://www.investopedia.com/articles/pf/06/homesaletax.asp
Will Your Home Sale Leave You With Tax Shock? February 19 ... can ... Read More »;
Free Car Payment Insurance: What's The Catch? Many ...
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http://www.investopedia.com/articles/tax/09/property-sale-installment-payment.asp
... Gains Tax and Will Your Home Sale Leave You With Tax Shock?) How the ... sales mirrors
that of annuities, where a prorated portion of each payment is considered a ...
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http://www.investopedia.com/articles/pf/08/pay-in-cash.asp
... card and end up carrying a balance, or only make the minimum payment each month ... Then
it's a shock to their systems when the monthly statement comes and it's far ...
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http://www.investopedia.com/articles/mortgages-real-estate/09/mortgage-impound-accounts.asp
... expenses gradually throughout the year, borrowers avoid the sticker shock of paying ...
amount that fixed-rate borrowers think of as their monthly payment is still ...
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