Question:

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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Common misspellings: mortage and morgage