Peaceful Divorce

Scott Evans: Adjustable Rate Mortgages Set to Skyrocket?

One of the things I have learned over the years is that we cannot be a Jack-of-all-trades and a master-of-none. In today’s ever-changing world, we need to have connections with professionals in other disciplines and specialities. This is especially true working in the divorce area.

I think it is important that we do the same thing and have our own list of specialists. The article below is by Scott Evans, CCIM, CRMS of the Family Mortgage Team, LeaderOne Financial Corporation in Marietta, Georgia.

ARM Rates Set to Skyrocket

If you’ve had an Adjustable Rate Mortgage (ARM) since the financial crisis hit in 2008, you had a great ride. For those that had annual adjustments, rates over the last 7 years have rarely exceeded the low 3% range, and for several years were in the high 2’s. Unfortunately, the party is coming to an end in 2016. After remaining below 1% for the past 7 years, the one-year LIBOR index has finally started to rise. This is the index that most adjustable rate mortgages are tied to. Last year at this time it was .84%, today it is 1.48%, almost a .75% increase. To calculate what your rate will be each year, the typical ARM will adjust to what the one-year LIBOR index is, plus a margin of 2.25%. So, if your rate is adjusting later this year, it will be 1.48% + 2.25% or very close to 3.75%. That is up from a rate of 2.875% last year. You will want to check your paperwork to confirm that this is how your particular loan would adjust to be sure. The document to look at is your Adjustable Rate Note.

Why is this happening when other rates are steady or even falling at times? It has to do with regulatory changes going into effect in October that will be rolled out by the Securities and Exchange Commission (SEC). The changes are designed to prevent the type of run on Money Market Funds that happened in the wake of the financial crisis in Sept. 2008. The LIBOR index measures the cost banks pay for financing. The new rules greatly reduce the attractiveness of these money market funds, driving up the cost foreign banks are paying to borrow, hence the movement in the LIBOR. The good news is that long-term rates have not yet moved up and are hovering near all-time lows right now. This creates a unique opportunity to lock in a long-term rate where you currently are with your ARM or possibly lower than where your ARM will be adjusting next. 


Robert D. Bordett CFP, CDFA
Collaborative Practice and Mediation Services
bob@u2agree.com
888 U2AGREE (888.822.4733)

Views: 22

Comment

You need to be a member of Peaceful Divorce to add comments!

Join Peaceful Divorce

Become an affiliate of the Happily Divorced! book and audio program! Let Reformed "Killer" Divorce Attorney, Cynthia Tiano, and Dr. Max Vogt, Marriage and Family Psychologist, take you on an adventure into the lives of two families going through the divorce legal system - one doing "legal battle" and the other creating a "peaceful divorce". Learn how to create a Win-Win from their experiences... HappilyDivorced.org


Events

Latest Activity

Robert D. Bordett, CFP, CDFA posted a blog post

21st Century Parenting Plans

I remember when the default custody arrangement had one parent as the custodial parent, and the other parent was known as the “Disneyland parent.” They had their children every other weekend, and maybe once during the week for dinner. Today it is more common to see joint parenting time consist of one week on, and one week off or “two-two-five-five” time,…See More
Aug 15
Robert D. Bordett, CFP, CDFA posted a blog post

Including a Financial Professional in Your Mediation

Very often, couples who are divorcing amicably, or who have straightforward financial situations, will forgo meeting with a financial professional while they go through mediation. Though this may seem logical on its face, “going it alone” may result in unnecessary hardship and inaccurate calculations.  It is easy to simply look at a tax table today and say “I am going…See More
Jul 30
Robert D. Bordett, CFP, CDFA posted a blog post

What About the House?

Going through divorce means dealing with hundreds of details, some more important than others. One detail that merits extra contemplation is how to deal with the marital home.Does one spouse want to keep it because the children still live there? You don't want to disrupt their lives any more than is already happening. What if the children are grown? Do you still need that much of a house?Here are the three most common means of dealing with the house in divorce:Selling the house and dividing the…See More
Apr 24

Badge

Loading…

About

© 2019   Created by Cynthia Tiano, Esq..   Powered by

Badges  |  Report an Issue  |  Terms of Service