Posted: Tue May 08, 2012 7:29 am
A mortgage reset is sometimes part of a balloon mortgage and it has several features. Generally when people first obtain their mortgage, they might have the option to pay much lower interest rates or make interest only payments for the first few years of owning the home. However, at a specific point, either the entire amount of the mortgage becomes due or the mortgage is readjusted and reset with a higher interest rate. This can dramatically increase monthly payments, and the mortgage reset certainly contributed to higher foreclosure rates in the latter part of 2000 because of many lenders inability to make larger monthly payments.