LIBOR is the rate on dollar-denominated deposits, also know as Eurodollars, traded between banks in London. The index is quoted for one month, three months, six months as well as one-year periods.
LIBOR is the base interest rate paid on deposits between banks in the Eurodollar market. A Eurodollar is a dollar deposited in a bank in a country where the currency is not the dollar. The Eurodollar market has been around for over 40 years and is a major component of the International financial market. London is the center of the Euromarket in terms of volume.
The LIBOR rate quoted in the Wall Street Journal is an average of rate quotes from 16 major banks.
Fannie Mae and Freddie Mac uses Libor Index
The most common quote for mortgages is the 6-month quote. LIBOR’s cost of money is a widely monitored international interest rate indicator. LIBOR is currently being used by both Fannie Mae and Freddie Mac as an index on the loans they purchase.
LIBOR is quoted daily in the Wall Street Journal’s Money Rates and compares most closely to the 1-Year Treasury Security index.
On adjustable rate mortgages, the margin is always constant and it is the index that fluctuates. Our Condo Hotel Mortgage Loan programs for Condo Hotel purchasers or for those who want to refinance their current Condotel mortgage loans, we offer a 3/1 ARM, 5/1 ARM, or a 7/1 ARM. All of our Condotel mortgage loan programs are adjustable rate mortgage products. There are no 30 year fixed rate mortgage products on Condotel Financing. Our Condotel mortgage loan programs are based on the Cost of Maturity Treasury index and the current margin rate is 3.0%.
Adjustment Rate cannot be lower than starter rate on Condotel Mortgages
With our Condotel mortgage loan program, the Condotel mortgage rate cannot be lower than the initial start rate. For example, if the Condotel mortgage loan starter rate is 5.25% and after the 7 year fixed rate period expires and the Cost of Maturity treasuries are at 0.123, the new rate of the Condotel Mortgage Loan would be 3.125% ( CMT index plus the 3.0% margin ), however, the clause on the Condotel mortgage note is that the new annual rate cannot be below the 5.25% starter rate.