My arm will adjust from 5.5% in December 2007. I'm not sure we will refi since we plan to move from this home in the fall. However, if we do stay (in case home takes longer to sell) what will interest rate adjust to? Prime is at 8.75% now? Does it adjust to that rate? Just asking.....
2007-03-29 05:08:04 · 4 answers · asked by mandy c 1 in Business & Finance ➔ Renting & Real Estate
Prime rate is curerntly holding at 8.25% and has been this way for at least one year now.
BTW, this is yet another index-lending rate GIVEN by the bank and it is less reactionary (does not react as quickly to market changes and is usually tied to T-Bills, discount rate for which is established by the Federal Reserve) than the LIBOR rate (tied to deposit rates and reacts quickly to changes in the market) used in residential lending. The rate at which the bank borrows money to loan to customers is known as COF (Cost of Funds)
2007-03-29 05:40:46 · answer #1 · answered by boston857 5 · 0⤊ 0⤋
My recomendation would be to analyze your situation, because property values are going down, and you might be upside down if you are not proactive enought, sometimes is better to pay the prepay and put you in a fix program for long term. You can email me at walding714@yahoo.com if you have any questions.
Adjustable-rate mortgage
An adjustable-rate mortgage (ARM) has an interest rate that changes based on changing market rates and economic trends. They usually offer an initial interest rate that is two to three percentage points lower than fixed-rate mortgages, but they don't offer the stability or assurance of a known mortgage payment in the years to come. If you don't expect to be in your home for many years, however, an ARM may be just what you need.
How often your interest rate adjusts is determined by the terms of the loan. You may choose a six-month ARM, a one-year ARM, a two-year ARM, or some other term. There is usually an initial period of time during which the rate won't change. This might be anywhere from six months to several years. For example, a 5/1 year ARM would mean the initial interest rate would stay the same for the first five years and then would adjust each year beginning with the sixth year. A 3/3 year ARM would mean the initial interest rate would stay the same for the first three years and then would adjust every three years beginning with the fourth year.
There will also be caps, or limits to how high your interest rate can go over the life of the loan and how much it may change with each adjustment. Interim or periodic caps dictate how much the interest rate may rise with each adjustment. For example, the terms of the loan may be that the rate can go up as high as one percentage point each year depending on the market. Lifetime caps specify how high the rate can go over the life of the loan. For example, the terms of the loan might specify that the rate cannot go up by more than a total of six percentage points.
The interest rates for ARMs can be tied to one-year U.S. Treasury bills, certificates of deposit (CDs), the London Inter-Bank Offer Rate (LIBOR), or other indexes. When mortgage lenders come up with their rates for ARMs, they look at the index and add a margin of two to four percentage points. Being "tied" to these index rates means that when those rates go up, your interest goes up with it. The flip side is that if they go down, your rate also goes down.
2007-03-29 13:17:56 · answer #2 · answered by walding714 2 · 0⤊ 0⤋
Prime is at 8.75% WRONG.
Prime is the rate charged to banks.
The adjustment will depend on the prime at that time.
2007-03-29 12:16:51 · answer #3 · answered by ed 7 · 0⤊ 0⤋
5%
2007-03-29 12:11:06 · answer #4 · answered by dhoni s 1 · 0⤊ 0⤋