I’m getting conflicting information regarding option arms.
I understand there are 4 options to making your mortgage payment. (P.I. based on 30 years at the starting rate (which more than likely results in negative amortization); interest only; P.I. over 30 years; P.I. over 15 years).
The second option, interest only… is the rate the margin plus the fully indexed rate?
If so, what changes every month that would effect my interest rate? (I assume the index rate.)
What’s the difference between LIBOR and MTA? And is there an advantage between them and 1 month vs 3 month
Is there someplace I can go to review what the LIBOR and index rates have done historically? My understanding is there’s little movement.
This site will give you some current and historical data
Here is a great site. Check this out. http://www.moneycafe.com/personal/allstates/interestrates.htm
It will give you all kinds of historical data, charts and graphs for each type of arm.
The MTA is usually a little less likely to move as quick as the Libor and Prime. Prime moves everytime Greenspan sneezes the Libor which stands for ( the London Interbank Offered Rate) moves a little slower then Prime and the MTA is the most conservative and gives you a little more time to make changes if needed. The MTA is a 12 month average of Treasury Securities and as the new month approaches it takes into effect the new rate and drops off the rate from 12 months ago and averages all 12 months. ( I hope I did not confuse you.)
The difference in the 1 month vs the 3 month is how they determine the margine that you get. And yes you are right about the index, as the index can move up and down, you will always keep the margin that you locked in at.
Did you have to take advanced courses to explain all of that, Ramona? :biglaugh:
Just kidding! Ramona is right. The MITA is not as volatile as the LIBOR and Prime. However, there are so many different types of programs out there that you could take the next year trying to understand all of the parameters.
You need to decide exactly what it is that you are trying to accomplish…then find a loan product that best fits your needs.