Look Out Placentia ARM Homeowners.....

Mortgage and Lending with Envoy Mortgage

For many Placentia homeowners with soon-to-adjust adjustable rate mortgages, the recent banking turmoil worldwide may lead to budgetary pain.

This is because most conforming ARMs made since 2003 are based on a borrowing cost called LIBOR and LIBOR is up an uncharacteristic 2 percent since September.

LIBOR stands for London Interbank Offered Rate and is the rate at which banks lend money to each other. 

Historically, LIBOR has tracked the U.S. treasury market,plus a half-percent increase.  This suggests that banks are only slightly less likely to default versus the U.S. government.

Today, that spread is close to 4.5 percent.

Since Lehman Brothers failed in September 2008, banks are fearful that their peers will meet a similar fate.  Looking at the chart, we can see how LIBOR has responded. 

The LIBOR spike is harming homeowners with adjustable-rate mortgages because adjusted rates on conforming mortgages are often calculated by adding 2.250 percent to the current 12-month LIBOR rate. 

On sub-prime mortgages, the adjustments are even more steep.

In general, though, as LIBOR rises, household payments rise, too, so if your home loan is adjustable and is due to reset soon, call or email your loan officer to talk about how LIBOR may impact your adjusted mortgage rate and payment.

For many Placentia homeowners, it's less expensive to refinance into a new home loan then to just let the adjustment happen.


This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Lending / Financial
California Orange County Placentia
real estate agent marketing
placentia real estate
mortgage blogging
mortgage sales and marketing
placentia mortgage

Post a Comment
Spam prevention
Spam prevention
Post a Comment
Spam prevention

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?


Rick Cardenas

Ask me a question
Spam prevention