Breaking
Down The Libor
When
doing your research for a mortgage or refinance, you may come across the
term LIBOR,
which is an acronym for “The London Interbank offered Rate Index”
This
pretty much means nothing to most people, it’s definition is as
follows The
average of interest rates that major international banks charge each other
to borrow U.S. dollars in the London money market.
The
reason for this would be: The international interest rate index is used
on some mortgages because American
mortgages are being purchased by foreign companies as investments.
The
LIBOR follows the world economic condition. It allows for international
investors to match their cost of lending to their cost of funds.
The
LIBOR compares most closely to the one year CMT index
Okay,
what is the CMT
index? The CMT index is the “Constant Maturity Treasury” index.
These indexes consist of weekly or monthly average yields on U.S. treasury
securities adjusted to constant maturities.
There
are several different LIBOR rates widely used as ARM
indexes, but the six month is the most common.
Fixed
Rate vs. Variable Rate Mortgages
Mortgage
Closing Costs
Interest
Only Loans
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