How this number is made
When an adjustable-rate mortgage leaves its fixed period, the payment is rebuilt from the balance that day, the new rate, and the years still in the term. Caps can limit the new rate. Type the rate after the cap, not a scary uncapped guess, if you know the cap.
- Balance is the scheduled balance at the reset, not the original loan.
- Years left are the remaining term, often 30 minus the fixed period.
Formula
New payment = standard amortizing payment on the remaining balance, new rate, and remaining years.
Worked example
With the figures already in the form, payment after the reset is $2,238.27.
Questions
Do rate caps apply?
Yes if your note has them. This page uses the rate you type. If the formula rate is 9% and the cap allows 8%, type 8.
Does the term start over?
Not on a normal ARM. The years left get shorter. A refinance that starts a new 30 years is a different loan.