- 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 years 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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