AgentMortgage

Are Libor adjustable mortgages a good deal?

Buydown feature may present 'incredible bargain' for borrowers

"My loan officer recommended a Libor ARM, said it was a good deal. Is this true?" It could be true. Libor ARMs may have lower margins than other ARMs because of their appeal to foreign investors. But that doesn't necessarily mean that you will get the lower margin, or that if you do, it won't be offset by some other feature of the ARM that disadvantages you. I advise against selecting an ARM based on the index, or any other one feature. You don't buy a car because of its tires. Like a car, ARMs have several important features, and you should select one because all the features add up to an attractive instrument. Libor is short for the London InterBank Offer Rate, the interest rate offered for U.S. dollar deposits by a group of large banks, including some U.S. banks, in London. There are actually several Libors corresponding to different deposit maturities. Rates are quoted for 1-month, 3-month, 6-month and 12-month deposits. A Libor ARM is an adjustable-rate mortgage on which t...