Pay-Option ARMs are the Best

Posted By: Dr. Frugal in Loans on 09/22/2007 at 05:57:52

WHAT··!! That's what I said when I read this article in Business Week but apparently the big brains at NYU and Columbia University seem to think so. Well, that type of mortgage would be the best in a perfect world anyway.

The key, according to professors Tomasz Piskorski of Columbia Business School and Alexei Tchistyi of New York University's Stern School of Business, is that this kind of mortgage is optimal only in a perfect world-namely, one in which borrowers are fully rational and always do what's in their own best interest.

Interesting. What I took away from this article more than the actual information was that, and this should be a surprise to no one, that if people consumers were more practical and truly looking out for their own best interests then it would be the best mortgage. How scary is it that most consumers don't even know what's in their best interest when it comes to taking out a mortgage·

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