Q: 5 1/2 arm will adjust August 1, 2020. 6 month libor, 1st day- WSJ + 2.25 margin, 1% cap. What is new rate?
Mortgage company says new rate will be 3.125, but 6-month libor has been under .5 for several months. Am I correct and if so what can I do about this? My rate adjusts every 6 months.
A: The adjustable rate should be ascertainable using the formula stated in the promissory note. The current 6-month LIBOR rate appears to be under 0.34%.
Some typical determinants of an adjustable-rate mortgage calculation are: (1) the specific date from which the 6-month LIBOR is drawn; (B) whether there is a maximum percentage change up or down that applies (e.g., If the existing percentage is 5% and the maximum downward adjustment is 2%, the resulting rate might be 3%, even though the index calculates a different percentage); and (C) any applicable default provision.
Given that the rate adjusts every six months, and that the current trends are favorable towards borrowers of adjustable-rate mortgages, you should make your own determination and communicate it with the lender. If you are not obtaining satisfaction, you should seek the assistance of an attorney to enforce the terms of the loan agreement.
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