- Fixed Rate Mortgage
- A fixed rate mortgage has the same interest rate and
monthly payment throughout the term of the mortgage. The payment is calculated
to payoff the mortgage balance at the end of the term. The most common terms
are 15 year and 30 years.
- Fully Amortizing ARM
- This 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 annually. A Fully Amortizing ARM
will also have a maximum rate that it will not exceed. This calculator uses a
maximum interest rate of 12%. 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. |
- Interest Only ARM
- An Interest Only ARM only requires monthly interest
payments. Since you are not paying any principal, as you are with the other two
types of mortgages described above, this can lower your monthly payment.
However, since your mortgage's principal balance is not decreased, you will
have a balloon payment at the end of the mortgage's term. Like a Fully
Amortizing ARM, an Interest Only ARM will often have a period where the
interest rate is fixed, and then it is adjusted annually. An Interest Only ARM
will also have a maximum interest rate that it will not exceed. This calculator
uses a maximum interest rate of 12%.
- Mortgage amount
- Expected balance for your mortgage.
- Term in years
- The number of years over which you will repay this
mortgage. The most common mortgage terms are 15 years and 30 years. Please note
that for the Interest Only ARM you will have a balloon payment for the entire
principal balance at the end of the loan term.
- Expected rate change
- The annual adjustment you expect in your ARM. The
range for this calculator is minus 3% to plus 3%. Use a negative value if you
believe interest rates will decrease, a positive value if you believe they will
increase.
- Interest rate
- Annual interest rate for each mortgage type. Typically an
ARM will have a lower interest rate than a fixed rate mortgage. The rate of an
Interest Only ARM will vary by lender.
- Months rate fixed
- This is the number of months the rate is fixed for an
ARM. During this period the interest rate and the monthly payment will remain
fixed. The rate will then adjust annually by the expected rate change.
- Interest rate cap
- This is the maximum interest rate for this mortgage.
The mortgage's interest rate will never exceed the interest rate cap.
- Monthly payment
-
Monthly principal and interest payment (PI) for the Fixed Rate Mortgage and the
Fully Amortizing ARM. This is an interest only payment for an Interest Only
ARM.
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