What are mortgage interest rates based on and how do I estimate what my ARM rate will be when it adjusts?

My 5-1 ARM adjusted last year and went to 6.25%. It will adjust again this November. Are mortgage rates based on the feds fund rate? Or something else? How can I estimate what my new rate will be?

By | 2013-08-28T07:21:12+00:00 August 28th, 2013|Mortgages Home Loans Interest Rate|4 Comments

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  1. Smart Piggy August 28, 2013 at 9:12 AM - Reply

    As it was already mentioned, your rate could be based on any one of those indexes, however if it resets in November I am willing to bet that your rate is based on the Libor index. Check your paperwork and if you cant figure it out then call your Mortgage Representative for assistance. Last November the Libor was just over 3% and today it is just under 2% which means if it resets again this November your rate may actually be going down. If this is the case then your interest rate spread is 3% over the Libor, so come November 2009 your rate might drop to about 4.5% if the Libor stays the same between now and then. For more on basic finances visit Finance 101 located at http://www.honestbanker.blogspot.com

  2. patrick August 28, 2013 at 8:30 AM - Reply

    There are multiple indices that are used by mortgage holders to adjust a mortgage rate. some are tied to t tresury bills, some are tied to the LIBOR rate.
    You will need to check with the mortgage holder, (or just check your original mortgage contract) and find out what index your mortgage is tied to, and what the”spread” is. (The spread is the additional % added to the index).

  3. Steve D August 28, 2013 at 8:25 AM - Reply

    You need to check your contract – the index will be in there. It could be the prime rate, it could be a T-Bill rate, it could be the Fed Funds rate, it could be the LIBOR. Until you know what the index is, you can’t calculate the new rate.

  4. David Z August 28, 2013 at 8:01 AM - Reply

    look at your loan agreement to see what your rate is tied. it will not be fed funds rate but some other index. those indexes are quoted daily in yahoo finance area.

    be careful. 30 year rates are about 5%. your rate could be 10% in 3-4 years if inflation takes off like so many experts predict.

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