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Let me show you an adjustable rate mortgage. also known as an ARM.
We'll look at a hundred thousand dollar loan amount,
a thirty year term at five percent interest.
Go ahead and calculate your payment.
This would be your payment for the fixed portion of your ARM
and say we have a five percent cap. So you do [5] [Shift] cap,
which is a second function of [%].
We're going to adjust one percent
every year
until we hit the cap. So that's [1]
[:] [1] We'll put that into the ARM.
So it's going to adjust one percent
every year
until we hit the cap. So let's go ahead calculate our
adjustable first year payment.
So your payment for one year in the adjustable period would be $598.05.
Press [ARM] again.
This is your second year's adjusted payment.
Your third year's adjusted payment.
Your fourth year's adjusted payment
as well as your fifth year's adjusted payment.
So notice that your sixth year's adjusted payment
remains the same as your fifth year's adjusted payment because you hit the ARM
cap
percentage.
So that's a quick overview on how we calculate adjustable rate mortgages. For
more details you can download our user's guide at www.calculated.com/support.