What is a LIBOR Loan?

A LIBOR Loan is an Adjustable Rate Mortgage (ARM) that adjusts based on a specified LIBOR index.  LIBOR stands for "London Interbank Offered Rate", which is the interest rate offered by many London Banks for dollar deposits.  These deposits (and thus the indexes) are generally 1, 3, 6 or 12 months.

LIBOR Adjustables can have an initial fixed period as short as 1 month to as longs as 10 years.  Generally, if your initial rate is fixed for more than 6 months (for example, 3, 5, or 7 years), the rate will then adjust after this period either every subsequent 6 months or 12 months.