Fixed Rate Mortgage vs. LIBOR ARM Calculator Overview
Fixed rate mortgages have a fixed interest rate for the entire term of the mortgage loan. Typical fixed rate mortgage options are 15 and 30 mortgages. Some lenders do offer other fixed rate term mortgages, such as 20 and 25 year fixed-rate mortgages. Fixed rate mortgages also have fixed monthly mortgage payments for the entire term of the loan so that the balance of the mortgage is completely paid off at the end of the mortgage term.
A LIBOR ARM is an adjustable rate mortgage that is based on the LIBOR index, which stands for the London Inter Bank Offered Rate. When a LIBOR ARM is due to adjust, a margin is added to the LIBOR index in order to figure out what the adjusted rate will be. The margin that is added to the index is established when the mortgage is originally set up and is fixed for the term of the mortgage.