LIBOR ARM Loans

• what they are
• how they change over time

LIBOR ARM Loans Explained

LIBOR ARM loans are adjustable rate mortgage loans that are based on the LIBOR index, or the London Inter-Bank Offer Rate index.

The LIBOR index is one of many interest rate indexes. It is a "third party" index. This means that it is a universally published index. The interest rate adjusts based on the LIBOR index. It does not adjust just based on your bank's whim. By using a third party as a neutral arbiter of interest rate changes the banks are removed from a conflict of interest. You can look up the value of LIBOR on the internet.

A LIBOR ARM is a loan that adjusts based on the LIBOR index. It can adjust on different timeframes. It can be fixed for different timelines, such as for 1 year, 3 years, 5 years, 7 years, or 10 years.

After the initial fixed rate is over the LIBOR ARM loan adjusts based on a predetermined schedule. They can adjust on different timetables, such as monthly, twice a year, annually, etc.