Owning a home provides a luxury that most renters don’t have, stability. But when your mortgage loan is based on an adjustable rate, payment shock can hit seemingly out of nowhere if rates begin to climb. And that is exactly what’s happening now. The adjustable rate mortgage (ARM) loan is based on the LIBOR one- year index with a margin of around 2.25%. So if the LIBOR is rising, then your monthly payment on your ARM loan will be as well. And that means now is the time to refinance your adjustable rate mortgage.
What is LIBOR?
The term LIBOR stands for “London Inter-Bank Offered Rate”. This index is determined by rates provided by the rates banks in London offer each other for inter-bank deposits. LIBOR rates are reported in various currencies every month and are also used to determine credit card rates.
Why is the LIBOR Rate Rising?
Presently, the LIBOR rate is being influenced by changing political climates. For the past couple of years, the LIBOR indexes have remained extremely low, near the one percent range. And so now that the rate is rising, so are the monthly payments on adjustable rate mortgages.
How Much has the LIBOR Rate Risen?
The LIBOR has risen 0.66 percent in the last year and is expected to continue rising at an even higher rate. At the time of this publication, the 1 Year LIBOR is 1.639 percent.
Click Here to see Historical Chart on the Libor Index and notice how quickly it can move up when it gets going.
The Next Step to Refinance Your Adjustable Rate Mortgage
To avoid payment shock, you as a homeowner should strongly consider refinancing your ARM loan. When looking to refinance your adjustable rate mortgage, it is important to be strategic and think long-term as well. At Transparent Mortgage we work to adjust the term of your loan and shop with dozens of lenders and banks to obtain the lowest rate. Contact us today to discuss your options and choose the path that is right for you.