How do I calculate what my payment will be with an ARM?

gito · Joined: 13 Jul 2008 Posts: 2 1.63 Dollars($)

I have an adjustable rate mortage at 8.46 (another part of our loan statement says 8 %) It says my interate rate will change by 3% percentage points based on the "Index" the highest "Prime Rate" as published by the Wall Street Journal, but will never decrease below 3.5%. It will be calculated by addeing a 01.25% "Margin to the current index. If my house payment is now $1027.15 how do I calculate what it could be? I was planning on refinancing, but I have poor credit and I have to pay a prepayment penalty if I pay it off. They have it worded so that I would have to pay if I pre-payed before the first rate adjustment. Can my payment be lower because of the current interest rate?

evolovik26 · Posted: Sun Jul 13, 2008 8:08 pm Post subject:

Prime rate is at 5% currently so if your rate is calculated at prime + 1.25
your rate after adjustment should be 6.25%. Your mortgage lender will also send you something in the mail regarding this a few months before the scheduled adjustment.
The 8.46% is probably APR and your actual rate is 8%. Check the loan documents you were given to see what index your rate is based on and what margin applies.
Index + margin will be your new rate when the fixed term of your loan expires.

gito · Joined: 13 Jul 2008 Posts: 2 1.63 Dollars($)

So my payment would be lower?

adonis · Posted: Sun Jul 13, 2008 10:29 pm Post subject:

Gito,

I suppose the rise or fall in the index will determine whether your rate will be lower or higher.

brian1 · Posted: Sun Jul 13, 2008 11:11 pm Post subject:

It is quite possible that your payment will be lower. Make sure and find out what your index and margin are before considering refinancing you may be doing more harm than good.

Brian

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