Posted on: 11th Jun, 2009 11:29 am
Are all hybrid ARMs tied to LIBOR, and annual adjusting ARMs to the MTA? Is there some guidelines to specify which program is linked to which index?
As far as I know, 5-6 ARMs has an initial five year fixed interest rate after which the interest rate begins to adjust every 6 months according to an index plus a margin. The index is considered to be variable while the margin is fixed for the life of the loan. 5-6 ARMs are usually tied to the 6-month London Interbank Offered Rate (LIBOR). Annual adjusting ARMs are normally tied to the MTA and have margins of 250 basis points (2.5%).
You need to speak to the lender who is issuing the arm, there are hundreds of arm options available. They should be able to provide you with details like 2-2-6. This tells you how much it can adjust on the first adjustment (2), then each subsequent adjustment (2) and the total max amount it can adjust for the life of the loan (6). There are arms that adjust monthly, every 6 months, annually, tons of options.
