A “LIBOR ARM” sounds vaguely related to a frozen shoulder.

It’s not.

Pronounced “Lee′-bore,” it stands for the “London Inter-bank Offered Rate,” a widely used benchmark (or peg) for setting mortgage rates and other debt.

Meanwhile, “ARM” stands for “Adjustable Rate Mortgage.”

Definition, Please

What does all that mean in practice?

A homeowner with a LIBOR ARM will typically have a mortgage rate that’s fixed for a prescribed period — most commonly 3, 5, or 10 years.

Thereafter, the interest rate will re-set annually to the LIBOR rate plus a prescribed increment, usually 1% – 2%.

Your Realtor will be happy to decipher that and other arcane financing terms . . .

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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