Leavenworth, KS asked in Real Estate Law for Kansas

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.

Related Topics:
1 Lawyer Answer
Scott C. Stockwell
Scott C. Stockwell
  • Lawrence, KS
  • Licensed in Kansas

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.

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.