Purpose
Refinance Purchase Home Equity

Loan Type
Fixed ARM Interest Only FHA

Amount

State
Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District Of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming

Display Mortgage Rates &
Refinance Rates in your State

What is a LIBOR Mortgage Loan?

By Bob Redtree

LIBOR mortgage loans can be a great option for many people because they offer several good options and lower interest rates.

If your one of the lucky people who are able to buy a new home in this economy you are probably wondering what type of loan to consider. Maybe you are in the market to refinance for the same reason (bad economy). You should consider a LIBOR mortgage loan.

What is a LIBOR mortgage loan?

LIBOR stands for London InterBank Offered Rate. This is an interest rate given for United States dollar deposits by many London banks. Rates are usually quoted for either one, three, six or twelve month deposits.

Are all LIBOR mortgage loans the same?

Sort of. All LIBOR loans are adjustable rate mortgages (ARMs) that are based on the London InterBank Offering Rate index. This interest rate is used as a base index for the ARM loans of short duration. The most common is the six-month rate. The LIBOR is actually an average of interest rates that international banks charge each other to borrow United States dollars.

How do I know if this might be for me?

These loans are great for people with shorter term real estate goals and those who are okay with taking some risks. If interest rates rise, the loan rates rise along with them.

What else do I need to know before I apply for a LIBOR mortgage loan?

There is an initial rate period in which the interest rate does not change. This can be as short as six months or as long as ten years. There are subsequent adjustment periods that are the period between rate adjustments after the first one. If the initial rate on a loan was for three years, for example, it is then adjusted every year thereafter. Most adjust every six to twelve months.

A very good feature of these loans is the fact that they have a maximum interest rate. This is set at the start of the loan and the interest rate can’t go higher than a certain amount over the life of the loan (usually 5% to 6% increase).

Why should I consider a LIBOR mortgage?

These loans in conjunction with other features can add up to a nice ARM. If you do not plan on keeping the property you are buying long the interest savings in the beginning of the loan outweigh the risks of the increase of interest rates and payments later.

Related posts:

1. What Criteria Is Used To Determine A Change In An ARM Mortgage Loan?
2. What Are 30 Year Mortgage Rates Tied To?
3. Does The VA Have The Lowest Mortgage Rates?
4. Why Do Mortgage Rates Change?
5. Does The Prime Rate Affect Mortgage Rates?