Learn about Libor mortgages Everyone asks me what Libor is. Well, a Libor is an interest rate, Libor stands for London InterBank Offered Rate. There is a group of London banks and they offer this rate, in fact there are actually more than one rate that you could get depending on the maturity of your deposit. You will find different rates for 1, 3, 6 and 12 month deposits. Before you make your decision on the length of the term you want be sure to ask about Libor. A Libor mortgage is a popular mortgage due to the fact that it is an adjustable mortgage. With a Libor mortgage you will have a period at the beginning of the mortgage that is fixed and from then on your interest rate will be adjusted by the Libor that it is tied to. This means that when the Libor changes so does your mortgage rate. If the Libor rate goes up then your mortgage payment will go up by this percentage plus a margin. There is however an adjustment cap. There are many desirable factor of a Libor mortgage. A Libor mortgage is perfect for foreign investors who do not want to pay excruciatingly high interest on dollar denominated investments. It is hard to find a deal that matches a Libor. The margins on a Libor can be lower due to the fact that they have a relatively small risk factor. A-Quality borrowers have seen differences like 1.5 percent as compared to 1.75 percent. That is a substantial difference in the interest rates. The benefits of a Libor mortgage cannot be given to everyone. If you are not an A-Quality borrower you will not be able to get a Libor mortgage. Another popular aspect of the Libor mortgage is their attractive buydowns. If you have a Libor mortgage you, may be able to "buydown" your rate buy paying a point or two. While this is a good bargain these mortgages may have a very high maximum rate, this is an option that you will have to think carefully about. When you have a Libor mortgage you will not have as much payment flexibility but this way neither will you have to worry about all of the risks that come hand in hand with negative amortization adjustable rate mortgages. You will however find that the rates of a Libor mortgage can be volatile. For the most part there are many similarities between a Libor adjustable rate mortgage and any other adjustable rate mortgage. For instance they both have an initial rate period where the interest rate will be fixed. You will see the term Subsequent adjustment period, this is simply the time after the first payment and between each subsequent adjustment. The vast majority of Libor adjustable rate mortgages are adjusted one a year or once every 6 months. Every Libor mortgage has an adjustment cap. This means that your interest rate will not be able to go up too much too fast. These rates are generally between 1 percent and two percent depending after the very first adjustment. And besides the adjustment cap there is also a maximum interest rate. Your interest rate can only get so high over the life of the loan. This assures you as the borrower that your interest rate will not simply climb and climb and climb over the term of the mortgage. It is the combination of the various features that make a Libor mortgage so appealing to many people. Just like any other adjustable rate a Libor is especially great if you are purchasing when the market is very high. You do not want to have to get a fixed rate mortgage then because you will still be paying a high interest rate even when the market lowers. If you can get a Libor adjustable rate mortgage for a great interest rate it may well be worth the risk of the market going up. If you are not sure which kind of mortgage would be best for you and your family you should consider using some of the tools that you can find online. Not only can you find a mortgage calculator you can also do an interest rate scenario analysis. This is your best bet when trying to see what your mortgage will actually cost you over the years.