Home Buying in Seattle>Question Details

Shelby, Both Buyer and Seller in Seattle, WA

How Does an ARM Borrower Faced With a Rate Reset Figure Out in Advance What the New Rate Is Likely to Be?

Asked by Shelby, Seattle, WA Mon May 6, 2013

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Shelby,
My colleagues are right, but here's some more information. Your index is tied to an external measurement like the T-Bill or the LIBOR (London Interbank Offering Rate). These reflect the general state of rates and the economy. If they are up, your rate will go up. If they are down, your offer could go down, although most ARM's have a floor (the bottom rate) and a Cap (the maximum rate, often 5% above the starting point).
For now your ARM will likely stay low, but if you plan to be in the home long term, you may want to consider changing to a long term fixed rate.
0 votes Thank Flag Link Mon May 6, 2013
Shelby,
My colleagues are right, but here's some more information. Your index is tied to an external measurement like the T-Bill or the LIBOR (London Interbank Offering Rate). These reflect the general state of rates and the economy. If they are up, your rate will go up. If they are down, your offer could go down, although most ARM's have a floor (the bottom rate) and a Cap (the maximum rate, often 5% above the starting point).
For now your ARM will likely stay low, but if you plan to be in the home long term, you may want to consider changing to a long term fixed rate.
0 votes Thank Flag Link Mon May 6, 2013
you have gotten 2 good answers. good thing because my crystal ball is a little cloudy today.
0 votes Thank Flag Link Mon May 6, 2013
you have gotten 2 good answers. good thing because my crystal ball is a little cloudy today.
0 votes Thank Flag Link Mon May 6, 2013
Read your mortgage note that you signed when you took out the loan. The new rate will be a combination of a value from the "Index" and a "Margin". The index, from whatever source it comes from, can be looked up online. The margin is a fixed value for the life of the loan. The resulting figure from this addition of the 2 values is subject to a maximum increase from your current rate, such as for instance 1 percent, that will be specified in your note. It will also be subject to a maximum increase from the original interest rate, such as for example 5 percent, as specified in your note. Hope this helps. Consult your mortgage professional with specific questions.
0 votes Thank Flag Link Mon May 6, 2013
Shelby

Find out what your " INDEX" and " Margin" are .......if you are not sure ...you can call present loan servicer or look up these details in your loan paperwrok copies ( look for note and adjustable rate rider to note ) for details

once you know the these facts...looks up the present index ...add margin to this figure..this should get you close to what rate will move to

become familiar with the " CAPS " on loan as well as this may impact how much rate/ payment will change from period to period
0 votes Thank Flag Link Mon May 6, 2013
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