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Adjustable rate mortgages are to home buyers as carrots are to bunnies – very tempting. The secret to figuring out if an adjustable rate mortgage is a good deal is the rate index used. 

Indexes – Setting Rates

Lenders really want your business and are willing to create enticing loan products to get it. Occasionally, lenders will offer adjustable rate mortgages that offer a lot of carrot on the front end, but none on the back end. These loans are typically offered to you with an insanely low initial interest rate, which has you looking at mansions and other structures completely out of your realistic price range. The problem with these loans is the rate rises dramatically after six months or a year when the rate becomes pegged to an index. Go here!

Indexes are a unique animal when it comes to the mortgage industry. An index is a calculation of general interest rates charged across a number of financial markets that a bank uses to set a real interest rate on your loan. Common financial markets or products considered in this index include six month certificate deposit rates at local banks, LIBOR, T-Bills and so on. Let’s take a closer look. 

1. Certificate Deposits – Better known as “CDs”, these are the fixed time period investing vehicles you can get at your local bank. You agree to deposit a certain amount for six months and the bank gives you a guaranteed interest rate of return such as three percent. 

2. T-Bills – Officially known as Treasury Bills, T-Bills are the credit cards for the federal government. Currently, Uncle Sam owes trillions of dollars on his and pays a certain interest rate on the debit. The interest rate is used by lenders in calculating your ARM rates. Learn more!

3. Cost of Funds Index – It gets a bit technical, but this index represents the rates being used by banks in Nevada, Arizona and California as an average.

4. LIBOR – Officially known as the London Interbank Offered Rate Index, LIBOR is a popular index upon which to base ARM rates. Now, you are probably wondering what London has to do with the United States real estate market. LIBOR represents the interest rate international banks charge to borrow U.S. dollars on the London currency markets. LIBOR rates move quickly and can result in unstable interest rate moves for your adjustable mortgage. 

Why Indexes Matter

Indexes matter because they set the base of the interest rates charged on your loan. Assume you apply for an adjustable rate mortgage based on a LIBOR index. Assume the LIBOR rate is 2.2 percent when you apply. The 2.2 percent is your starting interest rate. If the LIBOR shoots up one percent in eight months, your loan will do the same. -!

Importantly, the index rate used for your loan is not the interest rate you will pay. Instead, you have to add the banks margin on top of the index rate. Most banks will charge two to three percent on top of the index rate. Using our LIBOR example, the initial interest rate of your loan would be 2.2 percent plus whatever the bank is using as a spread. Obviously, this means you need to closely read the loan documents to figure out how the game is being played!

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San Diego is known for its year-round sunny weather, pristine beaches, and vibrant arts scene. This SoCal city has many other attractions, including its beautiful beaches and rich military history. It is worth exploring.

Food is another draw, and the city`s eateries embrace a variety of cuisines from around the world. You can find local favorites at casual lunch spots or fine dining experiences right by the ocean.

History

The history of San Diego begins in 1542, when Spanish explorer Juan Rodriguez Cabrillo discovered the bay. Cabrillo gave it the name San Miguel, but Sebastian Vizcaino renamed it in 1602.

After Cabrillo saw it, Diegueno and Luiseno were the first to settle the area. They ate small game and acorns but were also skilled hunters who collected food and medicine from the ground.

In 1769, a Spanish Presidio was established here. Father Junipero Serra founded the first California missions (restored in 1931). Old Town San Diego grew up around the mission, and by 1834 it had become a pueblo (town). The Mexican-American war removed the city from Spanish control.

Weather

The weather in San Diego is generally pleasant throughout the year. The climate in San Diego is semi-arid and Mediterranean. Temperatures can reach above 70 degrees during the day, and lower than 60 at night.

Rainfall is minimal, averaging about 12 inches per year. Although snow is rare, it can occasionally fall in the mountains.

The climate in San Diego varies significantly over short geographical distances, creating different microclimates. This phenomenon is most prominent during the so-called May gray / June gloom period, where a thick layer of “marine layer” clouds keeps the air cool and damp within a few miles of the coast but yields to bright cloudless sunshine between about 5 and 15 miles inland.

Beaches

San Diego has mile after mile of beautiful beaches, ranging from wide public stretches to secluded coves. Some beaches have a spectacular view of San Diego`s skyline, while others offer breathtaking views of its cliffs and picturesque piers.

San Diego has many beaches that are open to the public. Parking fees are charged for state beaches such as Silver Strand in Coronado or Carlsbad State Beach.

La Jolla Shores is a popular beach for swimming, surf, and sunbathing. Its mile-long, gently curving beach is protected from large waves and boasts lifeguard stations.

Dining

Whether you want to dine at a romantic restaurant overlooking Mission Bay or grab quick eats at a beachside spot, San Diego has a restaurant to satisfy your every craving. The culinary scene in San Diego is flourishing!

Chefs are proud of their community, often donating funds to local causes. And the cuisine is a mix of traditional and contemporary.

San Diego`s food scene is diverse, with everything from casual sister restaurants like George`s at Ironside and George`s at Cove to a three Michelin-starred restaurant. The good news is that the vibrant dining scene has escaped its past reputation for burritos and tacos. It`s now filled with design-centric farm to table spots, friendly pizza joints and award-winning sushi in a strip-mall! And it`s all delicious.

Nightlife

San Diego`s nightlife scene offers many experiences. There is something for everyone, whether you are looking to have a fun night out with your friends or enjoy a romantic dinner.

If you`re looking for a swanky experience, F6ix Nightclub in the Gaslamp Quarter is one of the best places to go. The club has a stylish, modern atmosphere with state-of the-art sound and lighting systems.

Side Bar is another place worth checking out for a night out. It`s a unique combination of nightclub and ultra-lounge in Downtown San Diego’s Gaslamp Quarter. The venue is a sophisticated, elegant rendezvous that combines subtle distractions such as erotic paintings with custom-designed ambient lighting and unpredictable bottle parades.