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Fixed Term Jumbo ARMs
Jumbo and Super Jumbo Adjustable Rate Mortgages (ARMs) are mortgage loans that have an initial fixed period of 5, 7 or 10 years. During this period the rate and payment do not change. Up to a certain loan to value 10 year interest only options are also available for Jumbo ARMs. After the initial fixed period the interest rate and payment can change depending on the index that the adjustments are tied to along with a set margin. Following are the two most popular indexes used to determine the new rate of interest after the fixed term:
- LIBOR Index: LIBOR stands for “London Interbank Offered Rate”, which is the interest rate offered by many London Banks for dollar deposits. These deposits (and the indexes) are for 1, 3, 6 or 12 month durations. Generally, if your initial rate is fixed for more than 6 months (for example, 3, 5, or 7 years), the rate will then adjust after this fixed period either every subsequent 6 months or 12 months. Almost all Jumbo Mortgage ARMs use the LIBOR as an index these days.
- Treasury Index: An index based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. It is commonly used in determining mortgage rates for mortgages with an unfixed component and as a performance benchmark for investors in the capital markets as it represents a rate of return that investors would be able to get from almost any bank, with minimal effort. Treasury indexes are proprietary. The calculations of treasury indexes and their components vary by the financial institution calculating the index.
If you’re curious about the ins-and-outs of our jumbo and super jumbo ARM options, feel free to give us a call. We’ll guide you through the loan process, answer any questions you may have about the complex world of loaning, and we’ll find the right solution for your financing. Check out our information on 15, 20, and 30 year fixed loans as well. Or read information on our interest only jumbo and super jumbo mortgage loans!