Ask Terry Questions ARM – LIBOR Index vs SOFR


By Terry Savage on May 15, 2023 | Housing / Real Estate

I have a 5/1 adjustable mortgage interest rate, max 8% and I have had the loan for 7 years. My rate started at 3% and has stepped up to 5% in the last 2 years. I received a letter from my bank stating that as of June 30, 2023 the LIBOR index will no longer be available and my mortgage rate will be calculated using the SOFR index starting August 1, 2023. What does this mean? Should I refinance? My payoff is $117k.

Terry Says

LIBOR has gone away, and all banks and institutions are substituting SOFR (the Treasury Secured Overnight Financing Rate). It works about the same way, so no need to take action.
If that rate does continue to rise, though, you might consider a payoff of your loan, if you have money “sitting around”. But just refinancing is not going to lower your rate compared to the SOFR adjusted rate.



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