LIBOR Indexed ARMs

LIBOR ARMS also come in a wide variety to meet specific home owners needs. The rates on these loans are calculated using the current London Interbank Offered Rate.

LIBOR-indexed ARMs (or London Interbank Offered Rate Indexed ARMs) offer lower initial rates and mortgage payments and can be used for specific scenarios where it is acceptable to take on the additional risk of the payment increasing over time.

LIBOR-indexed ARMs are available on the following loan products:

• 6-month and 1-year LIBOR-indexed ARMs
• 3/6-month, 5/6-month, 7/6-month and 10/6-month ARMS
• 3/1, 5/1, 7,1 and 10/1 LIBOR-indexed ARMs

They can also be used with Home Possible Mortgages (5/1, 7/1 and 10/1 ARMs only), Financed Permanent Buydown (5/6-month, 7/6-month, 10/6-month, 5/1, 7/1 and 10/1 ARMs only), A-minus Mortgages, Mortgages for Newly Constructed Homes and mortgages secured by manufactured homes (7/1 and 10/1 ARMs only).

ARMs secured by investment properties are eligible if the borrower owns only one financed investment property. If the borrower owns more than one financed investment property, the investment property mortgage must be a 7/6-month, 10/6-month, 7/1 or 10/1 ARM.

6-month, 3/6-month, 1-year, 3/1, and 3-year ARMs with margins of 400 basis points or more are not eligible under Freddie Mad guidelines.

The transaction type for this type of mortgage could be purchase, no cash-out refinance or cash-out refinance. The down payment type could be secondary financing, shared equity plans or temporary subsidy buydowns.

This type of mortgage offers flexible repayment options and can be very helpful for borrowers in specific circumstances, however it is certainly not the best solution for every borrower.