- Adjustable Rate Mortgage (ARM)
- This calculator shows a fully amortizing
ARM which is the most common type of ARM. The monthly payment is calculated to
payoff the entire mortgage balance at the end of the term. The term is
typically 30 years. After any fixed interest rate period has passed, the
interest rate and payment adjusts at the frequency specified. A Fully
Amortizing ARM will also have a maximum rate that it will not exceed. Below is
a list of the most common types of Fully Amortizing ARMs.
|
Common Adjustable Rate Mortgages |
|
ARM Type | Months Fixed |
| 10/1 ARM |
Fixed for 120 months, adjusts annually for the
remaining term of the loan. |
| 7/1 ARM |
Fixed for 84 months, adjusts annually for the
remaining term of the loan. |
| 5/1 ARM |
Fixed for 60 months, adjusts annually for the
remaining term of the loan. |
| 3/1 ARM |
Fixed for 36 months, adjusts annually for the
remaining term of the loan. |
| 1 year ARM |
Fixed for 12 months, adjusts annually for the
remaining term of the loan. |
- Mortgage amount
- Original or expected balance for your mortgage.
- Term in years
- The number of years over which you will repay this loan.
The most common mortgage terms are 15 years and 30 years.
- Starting interest rate
- Initial annual interest rate for this mortgage.
- Current index
- The current interest rate of the index used to calculate
the interest rate on this Adjustable Rate mortgage. The current index rate plus
the margin on that rate produces the Fully Indexed Rate that is used to
calculate the APR for this mortgage.
- Margin
- The interest rate percentgage above the index, or the 'margin',
used to calculate the Fully Indexed Rate.
- Starting monthly payment
- Monthly principal and interest payment (PI)
based on your beginning balance and starting interest rate.
- Months before first adjustment
- This is the number of months that the
interest rate is fixed. After this period, the interest rate will be subject to
rate adjustments. If you enter zero in this field, we assume that the rate will
begin making adjustments after initial period of time between adjustments has
passed. If any number other than zero is entered, the first adjustment will
take place at that time, and adjustments will happen at the frequency entered
in the "months between adjustments" field.
- Months between adjustments
- The number of payment periods between
potential adjustments to your interest rate. The most common is 12 months,
which means your payment could change at most once per year.
- Expected adjustment
- The amount you believe that your mortgage's interest
rate will change. This amount will be added to or subtracted from your interest
rate.
- Interest rate cap
- This is the highest interest rate allowed by your
mortgage. Your actual interest rate will not be adjusted above this rate.
- Loan origination percent
- The percent of your loan charged as a loan
origination fee. For example, a 1% fee on a $120,000 loan would cost $1,200.
- Points paid
- Total number of "points" purchased to reduce your mortgage's
interest rate. Each "point" costs 1% of your loan amount.
- Other fees to include
-
Any other fees that should be included in the APR calculation. These fees can
vary by lender, but at a minimum usually includes prepaid interest.
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