Assuming you are referring to the 10/1 LIBOR ARM, the answer is that this loan is a fixed for ten years ARM (Adjustable Rate Mortgage) loan.
So that is what the 10 stands for. The '1' stands for the type of LIBOR used as an INDEX. (ARM loans are based on an index PLUS a margin) In this case the 12 month LIBOR (1 year LIBOR) is the Index. LIBOR stands for London Inter Bank Offering Rate, and represents the cost to the Lender, the margin then is their profit.
Also the '1' shows you how often the loan will adjust once the fixed period is over. These loans are referred to as Fixed Period ARMs.
So remember the first number is how long it is fixed.
-The second is how often it will adjust (term of the index)
-Then the name of the index'
-There are other abbreviations you may see like "I/O", which commonly means that the fixed period (or longer) is an interest only payment.
Hope that helps!
Answer Submitted on Fri, May 30 2008
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