Initial ARM rate miscalculated?

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We just got our ARM "adjustment" letter from our lender; we had a 5/1 loan tied to the one year LIBOR and the five years are up. The rate is supposed to be LIBOR + 2.25%. The letter shows what the initial LIBOR and margin were 5 years ago and the total is actually about 1% lower than what we've been paying for the last 5 years. I went back and looked at historical LIBOR rates, and sure enough, our rate should have been lower, we just never checked it at the time. We also went back thru our loan docs and realized that while it specifies LIBOR + 2.25% all over the place, it actually never stated anywhere in the docs that we signed what LIBOR actually was at the time. There were no points.

I've heard of discounted initial rates, but I've never heard of a rate that ends up higher than the index + margin. Is this possible, and is there anything that we can do about it?

Thanks!

evolovik26 · Posted: Tue Feb 05, 2008 6:27 pm Post subject:

You can call your lender if its written in your mortgage that this is what its supposed to be.
However there could be a clause in there sayin that it will not be less then X% or maybee you confusing something.
If you are correct though then definately call your lender.

ckalvesmaki · Posted: Wed Feb 06, 2008 5:21 am Post subject:

We just got our ARM "adjustment" letter from our lender; we had a 5/1 loan tied to the one year LIBOR and the five years are up. The rate is supposed to be LIBOR + 2.25%. The letter shows what the initial LIBOR and margin were 5 years ago and the total is actually about 1% lower than what we've been paying for the last 5 years. I went back and looked at historical LIBOR rates, and sure enough, our rate should have been lower, we just never checked it at the time. We also went back thru our loan docs and realized that while it specifies LIBOR + 2.25% all over the place, it actually never stated anywhere in the docs that we signed what LIBOR actually was at the time. There were no points.

I've heard of discounted initial rates, but I've never heard of a rate that ends up higher than the index + margin. Is this possible, and is there anything that we can do about it?

Thanks!

The initial rate has no bearing on the rate at the time of adjustment.....in other words......the only thing addressed in your note.....on a conforming loan is what the rate will adjust to and how it will adjust.

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