Mortgage shock? Adjustable rates tied to LIBOR, COFI, other indexes

With approximately 60 percent of outstanding adjustable-rate mortgage (ARM) loans set to the London Inter Bank Offered Rate (LIBOR), nearly 25 percent linked to average yields on certain Treasury securities, and 15 percent set to measures like the Cost of Funds Index (COFI), more homeowners are reacquainting themselves with the type of ARM they have and considering refinancing options such as 30-year, fixed-rate loans.


• It is important that homeowners who have adjustable-rate mortgages (ARMs) are aware of the index to which their mortgage is linked, as this determines the monthly payments. Payments of loans tied to the LIBOR, which is in the interest rate that banks charge each other to borrow money, could increase if the loan resets in November or December because of the recent increase in the index’s rate. Most ARMs are set to the one-month, three-month, or six-month LIBOR.
Homeowners who are concerned about possible payment increases should contact their local bank, credit union, or mortgage broker to rewrite their ARM into one with a fixed interest rate, if possible.

• Rates on adjustable-rate mortgages are determined by two factors –the loan’s index (LIBOR, COFI, Treasury) and the lender’s margin. A guideline to help determine the new rate when a loan resets is to add the lender’s margin to the new index. For example, if a homeowner’s ARM resets according to the six-month LIBOR index, which was 3.70 percent as of Oct. 22, and the lender’s margin is 2.5 percent, then the new rate would be 6.20 percent.

• Some mortgage brokers recommend that homeowners who have ARMs and are unaware of to which index their loan is set, should review their loan documents again to determine if they should consider refinancing into a new loan with a fixed rate or possibly one linked to a different index.

To read the full story, please click here:

About lcartolano

Hello! I am a Real Estate consultant working and living in the California East Bay (Oakland, Alameda, Piedmont, Berkeley area) with my husband and two young boys. I am a transplant from New Jersey and have been living on the West Coast for the last 17 years. I became a Real Estate Consultant because I enjoy working with people, and helping clients find the homes of their dreams, or reap the benefits of their investment in Bay Area real estate. It’s important to me to listen to your needs, provide the highest level of service and follow through on what needs to be done to and help you achieve your real estate goals. e-PRO Certified As more and more consumers begin their search for real estate-related information on the Internet, it is critical that real estate professionals are well educated in the use of technology to the benefit of both the consumer and the agent and/or broker. Realizing the importance of technology training, the National Association of REALTORS® (NAR) now offers its members the e-PRO certification course -- the only technology certification program offered by NAR. The program is designed to prepare real estate professionals to make the most of Internet technology and to identify, evaluate, and implement new Internet business models. The elite group of course graduates represents only one percent of all REALTORS in the country including Lisa Cartolano of Alain Pinel Realtors. QSC Certified QSC (Quality Service Certification) is a new training program for real estate professionals. It requires agents to follow specific procedures and introduces standards of practice for the benefit of the consumer. When consumers spend significant dollars for a service, they expect consistency, reliability, accountability and responsiveness from that professional service provider. Until now, the absence of service standards in the real estate industry contributed to the inconsistency of satisfaction and value experiences by the home seller and home buyer. Thus the Quality Service Certification program was created to offer greater value to the home buyer and home seller by providing consistent, reliable, accountable and responsive service for every real estate transaction. this service is provided by a Quality Service Certified real estate practitioner. Alain Pinel Realtors is proud to announce its association with Lisa Cartolano. An integral part of Alain Pinel Realtor´s dedication to excellence is the collaboration of high caliber professionals. Lisa Cartolano certainly fits that profile. Lisa brings to APR a wealth of skill, experience and professionalism, and joins a group of distinguished real estate professionals who are all part of the most sophisticated and technologically advanced marketing firm specializing in distinctive properties and estates. Alain Pinel Realtors is dedicated to excellence and our association with Lisa Cartolano is a bright example.
This entry was posted in Real Estate and tagged , , , , , . Bookmark the permalink.

2 Responses to Mortgage shock? Adjustable rates tied to LIBOR, COFI, other indexes

  1. Edwin says:

    Thank you very much for your post. Absolutely excellent information and very useful for me. Great done and keep posted. Looking forward to reading more from you.

  2. M Petrone says:

    With rates as low as they are though, people with an adjustable should consider refinancing into a fixed rate mortgage. Check my site for free mortgage refinance advice. Thank you for the great information though. I will check back to your site often

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s