I currently have an adjustable mortgage on a rental property. The first adjustment was September 2007, when my rate went from 7.2 to 9.2. The correspondence that came along with the increase stated that the interest rate charged was a margin of 6.120 added to the index rate, which at that time was 5.383. The top of the correspondence states: ARM Index: 6 month
LIBOR. The interest rate adjusts every six months with a 1.5% cap either way, with a ceiling of 13.2. Does this mean that every six months 6.120 is going to be added to the 6 month LIBOR and that will be what I'm paying?
The last time the rate adjusted it said the index was 3.794, a
decrease of 1.589 from the previous index amount, and my payment still increased $52.91. Shouldn't my payment have gone down?
Yes, the LIBOR rate has 6.120% added to it and if your current rate is lower, the rate and payment will go up. If your current rate is higher, your rate and payment should go down.
You said there was a 1.5% cap on the change. Can it be assumed that the change you had which exceeded that was an introductory rate, and not subject to this rate change cap?
Also, the payment influenced here is the principal and interest. Any escrows you have would be separate, so the P&I payment could decrease, but if an insurance or tax that is being escrowed increased, that would have the same effect on your payment.
In a case such as this, call your mortgage lender and ask them these particular questions. You need to understand your mortgage terms and the fees that may apply, as well as how often your rate and payment could change. Your lender is the one best equipped to answer this, based on your loan documents. They should be eager to assist you.
BankingQuestions.com is a free service made possible by the generous support of our advertisers. Advertisers are not responsible for site content. Please help us keep BankingQuestions.com FREE by supporting our advertisers. When you see an ad for a product or service you may have an interest in, click through to learn more.
Accounts
Article
Q&A
Podcast
Video
Blog
Discussions
PDF
Powerpoint
Yes, the LIBOR rate has 6.120% added to it and if your current rate is lower, the rate and payment will go up. If your current rate is higher, your rate and payment should go down.