Frequently Asked Questions

What causes an adjustable rate mortgage to adjust?
The interest rate of an adjustable rate mortgage (ARM) is linked to a particular index of economic conditions. An index frequently used by Blue Value Enterprises, LLC is the six-month London Interbank Offering Rate or LIBOR. This index is the average of interest rates charged by major international banks to borrow U.S. dollars in the London money market. LIBOR is the British equivalent to the U.S. Prime Rate.

The LIBOR index is officially fixed once each day, although changes occur throughout the day. Changes in this index correspond to changes in the interest rate of an adjustable rate loan. Because the interest rate of an ARM is calculated by adding the index plus a "margin" (a pre-set, fixed interest rate established by the lender), a change in the index value will cause a change to the interest rate calculation. The number of times an ARM loan will adjust each year, and the maximum amount it can change, varies per loan. Borrowers are encouraged to consult their Blue Value Enterprises, LLC Loan Advisor with any questions regarding the ARM loan adjustment process.