The Libor Loan – Buyer Beware – Part 2

The Libor loan has been used by more mortgage brokers than we care to think about to get people into a California home loan that maximizes the amount of house they bought.  Now buying a higher valued piece of property makes sense if it truely ends up being more bang for your dollar.  However, remember that a Libor loan is a variable loan, an ARM, adjustrate rate mortgage, and is subject to change.  For many months it was a good deal, but in 2006 people are going to lose their houses or be forced to refinance their homes, if possible, to cover the rise in Libor interest rates.

It is almost humourous to see the examples that mortgage lenders have put on their websites to demonstrate that the best California home loan rates and the best rates available are the Libor loan.  You have to do the hunting yourself because I don’t want you to get locked into the sales pitch of Libor is the only, greatest and beat all deal, when in reality it might be the cause of someone losing their home.

Remember, mortgage brokers, mortgage lenders, and those touting the best available rates are in business to make a profit.  Website comparisons that show a Libor superduper California home loan for of $1,000,000 for less than $5,000 a months versus a $1,000,000 home loan on a fixed rate that pencils in at $7,150 a month and they show this differential for 5 years and a savings at $148,000 is misleading, when you know the ARM can’t maintain that spread for 5 years. 

Take your time when shopping for a mortgage and make sure that the home loan you take is the home loan you can best afford.