Re: libor vs. 12 mta - which for your ARM?

hakalugi wrote:
> 
> libor vs. 12 mta  - which for your ARM? -- assuming we'll be
> moving/selling by August of '05, so we only expect 21 months.
> 
> Assuming CAPS and prepays and points were the same, and the MARGINs
> were different, but worked out to be about the same Index'd rate,
> please tell me why would you pick one index over the other for your
> short term ARM?
> 
> thanks.
> 
> (note, I see the 12 MTA at 1.22 + my quoted margin of 2.4, so indexed
> rate of 3.6; i see the 6 month Libor at 1.22 + my quoted margin of
> 2.28 for an index'd rate of 3.5%)

If you think, as I do, that interest rates are more likely to increase
than to decrease over the period of your ARM, then choosing a "lagging"
index would be preferable. I suspect, that the MTA (avg over 12 months)
would fit that bill better than the 6 month LIBOR.

Another consideration might be the continued weakening of the US$ in the
international currency markets which might make the LIBOR even more
vulnerable than the MTA to more rapid increase in interest rates.

So, if I HAD to choose between those two ARMs, I'd choose the (MTA +
2.40%) over the (LIBOR +2.28%), even with a difference of 0.12% between
the margins.

Just my 1.95 cents.

Here's a helpful website:

http://www.mortgage-x.com/general/mortgage_indexes.asp