LOBO stands for Lender Option Borrower Option. It is typically a very long-term loan – for example 40 to 70 years. The interest rate is initially fixed, but the lender has the “option” to propose or impose, on pre-determined future dates, such as every 5 years, a new fixed rate. The borrower has the ”option” to either accept the new rate or repay the entire loan. The starting interest rate of a LOBO loan is usually quite low, designed to undercut PWLB loan rates, and is known as a “teaser rate”.
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