Interest Only Loans

1 Month, 3 Month, 6 Month, 1/1 ARM, 3/1 ARM, 5/1 ARM, 7/1 ARM & 10/1 ARM & 30 Year Fixed Interest Only for the first 10 Years,

What is a LIBOR or Interest Only Loan

LIBOR (London Inter-Bank Offered Rate) is the rate on dollar-denominated deposits; also known as Eurodollars, traded between banks in London. The index is quoted for one, three, and six month periods as well as for one, three, and five 7 & 10 Year Fixed Rate Periods. (i.e. 5/1 ARM is Fixed for the first 5 years the 10/1 ARM is Fixed for 10 years etc.)

LIBOR is the base interest rate paid on deposits between major 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. However, London is the center of the Euro-market in terms of volume.

Wall Street Journal reports the LIBOR rates, and the LIBOR rate quoted in the Wall Street Journal is an average of rate quotes from five major banks. Bank of America, Barclays, Bank of Tokyo, Deutsche Bank and Swiss Bank.

Both Fannie Mae and Freddie Mac use LIBOR as an index on the loans they purchase are currently using LIBOR, and the most common quote for mortgages is the 6-month quote and the three year interest only.


ARM Advantages

  • Basically bound to payment the minimum interest only every month, however, any amount over interest goes towards your principle.
  • This is an excellent loan program to pay less interest and more towards principle.
  • Extremely low monthly mortgage payments based on extremely low interest rate.
  • Those who want to sell the house in near future must consider a Interest only plan.

Disadvantages

  • If you are only paying interest then no money is contributed towards your principle.
  • It is possible that you need to refinance your loan after the fixed period is over to keep your monthly payments low.
  • If you want to keep the house for a longer period of time then it is not prudent to follow this ARM Mortgage Loan program.