What is a LIBOR ARM mortgage?Answer:
LIBOR stands for London InterBank Offerred Rate. A LIBOR ARM mortgage is an adjustable rate home loan tied to either 1-, 3-, 6-, or 12-month LIBOR index.
LIBOR ARM Mortgage Features
- Those ARMs do not have so many payment options, nor are possible to result in negative amortization.
- LIBOR ARMs are more volatile than ARMs tied to MTA, CODI or COFI ARM indexes
- LIBOR ARM mortgage loans are made very attractive to perfect credit borrowers - the margin is very low compared to other ARM margins. However, borrowers with real bad credit should avoid LIBOR ARM mortgages.
- LIBOR ARM rates usually adjust once or twice a year after an initial rate for 6 months to ten years.
Some LIBOR mortgages can have a very nice lifetime rate cap such as 5 or 6%; others can have a 10% or even higher lifetime cap.
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