The Indices that Determine Your Future Interest Rate

Below are the current graphs of the three most common indices used to price your future ARM interest rate.   As you can see below, ALL have increased significantly in the last years.

                                                                                  2014             2018
                                    1 Year Libor Rate            .583%          3.083%
                              1 Year Treasury Rate           .120%          2.650%
                                                Prime Rate            3.25%            5.25%

What does this mean for your ARM loan?   Let's use an example.

Example:   If you opened a 5/1 ARM LIBOR loan in 2014 and your initial start rate was 3.25% with a 2.25% margin, then your adjusted rate after 5 years will be 5.25% (a 2.00% increase).   For a $200,000 balance, your mortgage payment will increase $219.00 per month.   And, you are now on an annual adjustment schedule.  Based on the current index movements, you will probably see another 1.00% increase the following year (and another payment increase of $110.00).