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Fixed or Adjustable Rate?
A fixed rate mortgage has the same payment for the entire term of the loan. An adjustable rate mortgage (ARM) has a rate that can change, causing your monthly payment to increase or decrease. Use this calculator to compare a fixed rate mortgage to two types of ARMs, a Fully Amortizing ARM and an Interest Only ARM.
Definitions
- 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.
The mortgage calculators are provided by KJE Computer Solutions, LLC and made available to NUMBER1EXPERT as self-help tools for your independent use and are not intended to provide investment advice. We can't guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.
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| Q |
What is the world's most valuable piece of furniture?
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| A |
The 18th century Italian Badmiton Cabinet owned by the Duke of Beaufort sold in 1990 at Christie's, London for $15.1 million dollars. |
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Nelly Andrushenko
Power Realty Inc.
148-29 Cross Island Parkway
Whitestone, NY. 11357
718-747-0411
917-406-4922
Fax: 718-747-0504
Email: nelly@nellyshomes.com
Nelly Andrushenko started her career in Real Estate in 1989 and after being affiliated with a prominent local Real Estate company for a number of years, Nelly joined one of the Re/Max offices where she worked for four years. In March of 2002, Nelly founded her own Real Estate company, "Power Realty, Inc.". She is constantly in search of knowledge and ways to perfect her customer service. Nelly's enthusiasm and dedication to helping people has brought her success and recognition as a Top Realtor in Northern Queens. If you’ve been thinking of buying or selling a home in the near future, please call Nelly (718) 747-0411 or email her at nelly@nellyshomes.com"    
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