Are all hybrid ARMs (that are fixed for 3-10 years) tied to LIBOR, and annual adjusting ARMs to the MTA? Is there some formula for knowing which programs are tied to which index, or is it lender specific instead?

S. A.
Phoenix
Arizona

Answer:

Dear S.,

Lenders sell loans to various sources. The sources (FNMA, Freddie Mac, etc) choose what to base the loan on.

Most people don't really consider the index because they are just looking for the lowest rate for the period. For example, if you know you will only need the loan for 5 years and want a 5 year ARM, the rate will stay fixed for 5 years and you want the lowest rate for that period. After the 5 years, it is not that important.

Also, you will find that the margins are better on the higher indexes and higher on the lower indexes so that the lenders make about the same regardless of which index is used.

If you have any more questions, please do not hesitate to contact me.

Regards,

Fred Glick
20-22 N 3rd Street
Philadelphia, PA 19106
267-514-4630 x 201 Direct

Licensed PA Real Estate Salesperson REALTOR(R), NAR, GPAR member
www.inthecityrealty.com

U S Loans Mortgage
Member, Up Front Mortgage Brokers, NAMB, PAMB

Central Closing LLC