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.
Archive for the ‘interest rates libor’ Category
Am I missing something re: how to calcuate my interest rate when it adjusts (based on LIBOR)?
Wednesday, March 10th, 2010Forward rate agreement (FRA)
Tuesday, 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%
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Interest rate Widget?
Monday, March 8th, 2010How can I show commercial real estate interest rates(libor,etc) on my website? Does anyone know of a widget?
The Financials.com
http://b2b.thefinancials.com/
Life Insurance Premium Finance
Saturday, March 6th, 2010
Hi, Im David Mickelson at Mickelson Capital Consulting. Todays topic is going to some new options and opportunities in the world of life insurance premium finance. Life insurance premium finance has basically moved to the forefront in recent months. And, basically the reason is, many people like insurance as long as they dont have to pay for it. Nowadays, dozens of small to medium sized banks and credit unions have entered the space becoming life insurance premium finance lenders. And the reason is theyve recently discovered that its excellent high quality, completely secure debt that they can have on their books, and it seems in this credit environment its a very popular thing for banks to do. So all over the United States many banks that would have not thought about being in this business have entered the business, which has opened up the doors for opportunity for insureds and banks alike. It is so attractive nowadays because it is 100% secure that borrowers are often buying as big a policy as they qualify for because there is actually very little out of pocket, and the amount of collateral that they have to contribute is very modest compared to the size of the transaction. These are very efficient type transactions because it resolves issues for families. Number one, theres no large cash payments involved from the families. At most its interest payments. They dont have to disturb the investments they have in place. Number three, and probably one of the more important things, is many families are faced with difficult gift issues when they buy large amounts of insurance. Having this kind of premium finance pretty well eliminates almost all gift tax issues in families. Thats in a nutshell whats going on in the life insurance premium finance world. Oftentimes the policies that theyre using are either what we call equity index life insurance policies, and occasionally they are universal life. Sometimes the loans are based on LIBOR, and there are many new programs that base it on a variety of indexes that could be prime rate, LIBOR, or even international currency rates that are very attractive in this market. With that, Im David Mickelson wishing you a good day with Mickelson Capital Consulting. Bye for now.
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does anyone know the website where you compare student loan interest rates for private loans?
Saturday, March 6th, 2010it lists those that use LIBOR and those that use prime. thank you.
There are a couple of websites you should check out. The first is called BankRate.com. It is one of the original Financial websites and posts updates on LIBOR, interest rates on the BankRate website for some student loan types. Another helpful resource is Student-loans.net – a directory of lenders offering private student loans. Be sure to visit student-loans.net "loans by state" section which highlights some local banks and credit unions. Sometimes the best deals are in your own town. Good luck.
Can you explian interest rates?
Thursday, March 4th, 2010"interest rates for private loans are usually based on an index (such as Prime or LIBOR) plus a margin, depending upon your credit history". Both I and my co-singer have a credit score of around 740, what type of interest rate and im looking at?
There are several rates that are available to home buyers and other items you might want to purchase.
There are basically two types of loans
#1 Fixed rate
#2 Adjustable rate
Fixed rates are easily understood as they have a definite pay off date as the interest and principal are paid concurrently each time a payment is due. Payments are normally each month.
Adjustable rate mortgages are tied to some measurable means. There are several which LIBOR Is one, you also have the 9th district cost of funds. There are too many variable adjustment rates to explain here. Your adjustable might not kick in for a few years and that might also vary depending on the loan docs you sign.
If you decide to get an adjustable rate mortgage then you should have your mortgage consultant explain what your adjustable rate is tied to, if it adjust once and then becomes a fixed rate mortgage, then your adjustable could adjust monthly, every six months or once a year.
You and your mortgage consultant would have to make a decision based on your financial situation at the time you decide to purchase your house as to if you will want an adjustable or fixed rate mortgage loan.
I hope this has been of some use to you, good luck.
"FIGHT ON"
Swap Equilibrium MBACalculator.com
Wednesday, March 3rd, 2010
MBACalculator.com Solving for the swap price
FRA is a forward contract and specifies an interest rate to be paid on an obligation beginning on some future date. Any gain or loss on the contract is treated as a similar gain or loss on futures or options contracts of would. Please refer to the FRA spreadsheet for information on a forward rate calculations.
The forward rates are also known as the implied forward rates, are calculated using a process known as bootstrapping. The concept of bootstrapping this simple, an investor can invest in a six-month LIBOR and earned 4.25 percent. Alternatively the investor if can also invest in the spot market 4.10 percent for 3 months and then reinvest the money for additional three months. With both of these choices the lesser choice would have to rise to provide a comparable return to the preferred investment. If the market expects both investments to be equal with the return than we can solve to be implied forward rate.
We need to calculate the discount factor for the present value of the floating rate and the present value of the fixed rate in order to calculate the swap price. The swap price is also known as the equilibrium fixed rate price. To calculate the discount factor we use the percentages that are highlighted in yellow not the forward rates highlighted in green.
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Mortgage Interest Rates, Up or Down?
Tuesday, March 2nd, 2010Generally, during bad times like now (financial crisis, credit bubbles & bank failures), how would the mortgage interest rates perform? will the rates be going up or down?
If the bank is not having money, then they will have a problem in lending the consumers so will the rates be going up instead of going down? Correct me if I am wrong…
Do you think it will be more advantage to peg your interest rates with the SIBOR (LIBOR) or just a fixed rate throughout?
I am from Singapore by the way…
Thanks!
Looks like you have 3 questions, I will tackle them one at a time. My answers only apply to the US markets.
1) How do mortgage interest rates perform in bad times? – Conventional wisdom says that rates should be lower. Right now the Fed funds rate is at 2%, 30 yr fixed mortgages are averaging below 6%. Historically, this is a low rate. It can go lower, but not by much.
2) Banks do not have money, will this cause rates to rise? – The current argument is that banks do not want to lend even though they have money. The bailout bill that just passed in the US is supposed to fix this (it better, but I have my doubts). So far, this credit crisis does not seem to have affected mortgage rates, the 30 yr has been fluctuating by .5% for about a year now. Nothing out of the ordinary.
3) Should I get an adjustable LIBOR pegged loan? – Since rates are near a low, I would lock in a fixed rate mortgage. This is what cause the current crisis, people got adjustable rate loans during a low interest rate cycle and when it adjusted up, bingo they cannot pay.
There are still other considerations: How long do I plan to live in the house, for example. Am I prepared for the housing market to be down for several years to come? Can I afford the maximum adjustments with the adjustable rate mortgage?
Just have a good down payment and do not rush, make a wise purchasing decision. The market is on your side!
RBI liberalises ECB norms
Sunday, February 28th, 2010
The Reserve bank of India on Wednesday liberalised the ECB norms further. It announced that ECB upto $500 mn would be under automatic route. The Central Bank has widened interest rate ceiling for ECBs. The interest rate ceiling for 3-5 years now would be libor+300 bps. The interest rate ceiling for more than five years would now be libor+500 bps.
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How do LIBOR rates work?
Sunday, February 28th, 2010Hey,
I was just wondering how the London InterBank Offering Rate works. I mean I think its interest added when banks lend to each other but can someone confirm that with me?
Anyhow I see different libor rates. There are one month ones, three month ones etc. Does it apply when banks within a country lend to each other only or does it apply to international money exchange with different banks? If so what exactly does this lending do? I could really use some examples if possible.
If i’m completely wrong then please explain to me.
Thank you for taking the time to read this, i’m looking forward to your answers.
the London Inter Bank Offered Rate, or LIBOR, is the interest rate that the most credit-worthy banks around the world charge each other for loans ranging from twenty-four hours to five years. This global inter-bank market provides a means for financial institutions with excess capital to earn higher rates of return by its loaning liquid assets to those in need of the funds.
LIBOR is released each day at 11 a.m. London time. It then fluctuates throughout the day based upon the market’s expectations for economic activity and the future direction of interest rates.