Because of the variety of home loan and interest rate options, some unwary buyers choose unfavorable mortgage terms. Initially, the chosen mortgage option is ideal, even necessary. This usually consists of a mortgage program that offers low payments during the first few years of the loan term. Because full amortization cannot occur with the low payment, higher future mortgage payments are a reality.

When choosing to accept future higher payments, many buyers do so without fully understanding the process. It is easy to think that our incomes will increase before higher payments are due. Unfortunately, this is not always the case. Even if a buyer is able to secure a higher paying position, they may also acquire additional debts (credit cards, auto loan, etc.), which make it difficult to afford the increased mortgage payments. Payment shock is common, and affects a large percentage of borrowers who choose adjustable rate mortgages, interest-only mortgages, and other mortgage options involving low initial payments.

Homebuyers unable to afford higher payments may be at risk for foreclosure. On average, borrowers have at least three to five years to prepare for higher payments. During this time, borrowers should create a plan to eliminate existing debt. Paying off an auto loan may provide enough funds to cover the new mortgage. In some cases, agreeing to low initial payments may be a good idea. For example, homebuyers graduating from college within the first few years of acquiring a mortgage will probably experience a salary increase within the near future, in which a higher mortgage is affordable.

The only way to prevent payment shock is to prepare well in advance. Preparation involves more than waiting until six months before future payments are expected, and then begin re-arranging finances. On the contrary, buyers should prepare for future payments from day one. Moreover, request a payment schedule and a worse case scenario from the mortgage lender. Additional questions to ask include: