Can someone explain LIBOR

[MemoryMakers2669]

Yes, we are idiots, but we have a 5 year ARM. In September of this year, we are going to have a rate change. Our docs say LIBOR plus 2.25%. I am seeing LIBOR is currently .92%. Does this mean our Interest will actually go DOWN this September (for a year) to 3.17%??

YES, I am aware that the LIBOR today has nothing to do with the LIBOR in September. But just going with that for now. Just want to make sure I am understanding it correctly. Is there a projection of what the LIBOR will be in months to come, or is it only ever current? I see from teh last year it has been relatively low.

 

[Cheshire Figment]

LIBOR stands for the London Inter Bank Offered Rate and is used in international loans between banks.

I would suggest you read your copy of the mortgage. Near the area that talks about rates should be something that tells about adjustments. Normally there is a cap that the rate will not go up more than a certain amount. There may also be floor and ceiling rates, where it will not go lower or higher than specific rates. There may also be a cap to the decrease. If there is no cap, it will go to the LIBOR plus 2.25, either up or down.

 

[tar heel]

Yes, there is a really good chance it will go down.

 

[jel0511]

As a former mortgage analyst, who saw MANY LIBOR mortgages, I don't recall any being written without caps and floors. As stated above a cap is a rate that your adjusted rate can't go above and a floor is one which your rate can not go below. So your rate might drop below your current rate, as long as it's not below any floor written into your mortgage. It's usually plainly stated in the rate section as to what any caps/floors may be there. I'd recheck your mortgage paperwork to see if you have a floor, it's usually around 3% lower than the "teaser" or initial rate you get.

 

[Golf4food]

The ARM on our old house - currently on the market, any takers? - resets next month and will be dropping. If only vacant home insurance didn't offset that decrease and then some. Grrr.

 

[BellePrincessBelle]

Also keep in mind some mortgages can adjust more than 1x a year so read your paperwork carefully.

 

[Disney-Kim]

Yes, we are idiots, but we have a 5 year ARM. In September of this year, we are going to have a rate change. Our docs say LIBOR plus 2.25%. I am seeing LIBOR is currently .92%. Does this mean our Interest will actually go DOWN this September (for a year) to 3.17%??

YES, I am aware that the LIBOR today has nothing to do with the LIBOR in September. But just going with that for now. Just want to make sure I am understanding it correctly. Is there a projection of what the LIBOR will be in months to come, or is it only ever current? I see from teh last year it has been relatively low.

most likely your mortgage will NOT go down that much. You probably have a cap on the % change...like 1 point...up or down...to protect you from it goign up too much at once. So your rate will adjust down by the maximum % stated in your loan docs.

We also have a LIBOR Arm and our rate can only adjust up/down 1% max at a time, which is twice a year for us. We have been adjusting for years...this is a great time for us pymt wise. But we are at our low floor..no lower for us.