My mortgage doesnt adjust until 2011, but I re-read my mortgage documents last night and think I understand it, but am hoping for someone to tell me that I definetly do understand it correctly. So, my mortgage is currently at 6.65%. My adjustable rate is based on the LIBOR index, adjusts every 12 months at LIBOR+2.25% so lets pretend (for the sake of easy calculation) that the LIBOR rate is 3.5%, would my new rate really be 5.75% or am I missing something?
You are not missing anything. that is exactly how you determine your new rate starting in 2011 and every 12 months after that. Just make sure that you are using the correct libor rate when you estimate your adjustment. Also, check to see if there is a cap on the adjustment. Many ARMs will adjust up/down by no more than 2 percentage points.
Am I missing something re: how to calcuate my interest rate when it adjusts (based on LIBOR)?
March 10th, 2010How does the Canadian dollar affect interest rates?
March 10th, 2010Now that the Canadian dollar is at parity with the US dollar, I’ve been hearing in the news that the Bank of Canada will be hiking interest rates. What is the reason behind this? How exactly does the dollar affect the interest rate? Thanks!
The dollar does not affect the interest rate.
What the problem is, is the parity dollar, it makes exporting companies less competitive so the Canadian gov’t would really like a lower dollar.
But The Canadian gov’t also sees an overheated economy and is worried about inflation, and they will raise interest rates to stem inflation. Unfortuneatly this will attract more money to Canada and will raise the value of the dollar furthur
Like possible CDA/US 1.10/1 in a few years
I’ve been shopping for an internet bank, but then the Fed lowered the interest rate. Should I?
March 10th, 2010I’ve been looking at internet banks and getting ready to open an interest-earning checking account with INGDirect. Then interest rates dropped and I’m getting cold feet. I figure it’s still a better deal than the interest rate my bank gives (which is practically nothing) but I’m new to all of this and would appreciate some advice. Thanks!
Yes it’s worth it.
The best checking On-Line offerings that I know of are;
www.EverBank.com
www.INGDirect.com (2nd best rate, poor ATM choices)
www.Schwab.com (best rate)
We use EverBank. They have many more ATM’s available. Easy deposits via;
Electronic (ACH)
Bank by mail (they pay postage)
ATM deposits (no charge), many banks available.
based on what I know, my choices would be in the following order;
EverBank
Schwab
ING
All are FDIC insured. All have "Bill Pay". Everbank does require a $1500 average balance for free Bill Pay (it’s the only negative thing I can say).
BTW: GMACBank.Com is my first choice for savings. They do have ATM cards (fee reimbursed automatically) and checks….. but…. it’s not a checking account.
I replaced this low ARM for a higher, but Fixed rate. Did I do the right/wrong thing?
March 10th, 2010Next month starts year 7 in my 30 year 5/1 ARM. Currently 5.5%, next month would have set to 3.75%!!! Wow!!
(1-year LIBOR+2.25. Capped at 11%.)
However, got scared of inflationary yearly rate adjustments, so I refinanced to a 30 year fixed at 4.875%. Based on income, will not be able to re-fi after this year due to split. I can cancel only by today.
Did I do the right thing by going 4.875, or should I be sticking with the ARM at 3.75? The 4.875 starts a 30-year cycle again; the 3.75 only has 24 years to go but rate resets again next year. I have only one day (today) to cancel the refi if I want to keep the ARM loan! The low rate *is* such a teaser… so tempting to save that much in interest costs… for a year… but then… unknown…
Thank you for you answers! I was wondering if keeping the ARM would be some kind of trap. Now I think I will be alright. 
I’m assuming you’re intending to live in this house for a long time yet.
You did the right thing. Yes you could have done very well with the low ARM rate for the next year. But as rates continue to rise your ARM would quickly get very high over the next 5 years and even if you refinanced then the fixed rates would be high as well. You’ll lose out over the next 2yrs but over the long haul this is the much better and safer route.
invest at the historical rate of return at 10%?
March 10th, 2010i read online:
Starting principal balance: $0
Monthly investment payments: $500
interest rate: 10%
Future value: 20 years = $379,684
Future value: 40 years = $3,162,039
…where are they saying to put my $500 monthly investment?
Thanks
Stocks have historically returned an average of 10%/year over more than 70 years. That’s the about the only place you could get 10%/year, but only if you invest at the right time and get out at the right time. From ’33 to ’65 the average return was about 7% per year, plus dividends — for a total of approximately 10%. It was higher in the 1980’s, about 15%/year.
"The average return starts at 11.8% for the one-year returns, drops rather sharply to 10.6% for the two-year periods, and then declines gradually to 9.9% for the 100-year periods."
http://observationsandnotes.blogspot.com/2009/05/stock-market-returns-1-100-years.html
CD, money markets and bonds have paid more than 10% within living memory, during the hyperinflation of the 1980’s. But those days are long gone and hopefully will not come again.
So the answer is: stocks.
Why does Bank or England base rate effect my mortgage rate when the BOE does not lend money to banks?
March 10th, 2010Following recent news, I discovered that the Bank of England lends money only as the "lender of last resort". If the BOE does not reguarly lend money to banks (i.e. my mortgage is not underwritten by BOE loans) why does BOE base rate have a direct effect on my mortgage?
Because BOE base rate establishes the rate in which your bank will pay if they need the cash. In other words, BOE is the cost of money for your bank. Obviously, your bank has certain amount of risk when it lend money to customers, they will charge a bit more than their cost for taking the risk. So a borrower like you will pay a bit higher than BOE base rate.
Best wishes.
Is interest rate the most important thing when it comes to consolidating debt?
March 10th, 2010because financial experts say its the least important factor. They say people should ask themselves what is their total cost and how soon will they be out of debt? and finally, compare interest rate.
Nope. Its the total cost and time frame of the debt that matters. Interest rate doesn’t do anything for people. It just sets the payment. What has interest rate really done for people? Kept them in debt forever. Why? Companies are not providing any game plan to get people out of debt except for one, which Primerica Financial Services, where Citicorp Trust Bank is the lender of the loan.
What’s the difference between fed funds & libor rates,?
March 10th, 2010also when a client (AAA Corporation) takes out a loan what does the bank offer: fedfunds rates + spread; libor rates + spread; T bill rates + spread and last what’s prime rate composed of. In short at what price rates do banks get their fund and from where, what rates (names of rates) do they charge other banks and clients.
The federal funds rate is the interest rate at which private depository institutions lend balances (federal funds) at the Federal Reserve to other depository institutions overnight.
London Inter-Bank Offer Rate. The interest rate that the banks charge each other for loans (usually in Eurodollars). This rate is applicable to the short-term international interbank market, and applies to very large loans borrowed for anywhere from one day to five years.
The lowest rate of interest on bank loans at a given time and place, offered to preferred borrowers. Also called prime interest rate.
Forward rate agreement (FRA)
March 9th, 2010
An FRA is a contract that lets the buyer (who is long the rate) lock-in an interest (borrowing) rate. In this example, the FRA buyer locks in LIBOR at 3%
Duration : 0:8:52
Mortgages and Interest Rates Revised | WAHomeowners.com
March 9th, 2010
Follow the adventures of Bob and Sally as they learn about mortgages and interest rates in their home buying journey.
Duration : 0:2:58