APR Calculator for Adjustable Rate Mortgages

Do you want to compare and rank multiple adjustable rate mortgages (ARM) with different terms and payments? In that case, the first thing you need to do is translate those mortgages into one standard measure so that you can perform effective comparison. APR or Annual Percentage Rate is the way you can set this standard and this particular calculator will do exactly the same.

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Adjustable Rate Mortgage (ARM)
ACalculator assumes that the adjustable rate mortgage (ARM) is fully amortizing over the period. The process is, the payments are fixed for certain times and after that payments are adjusted annually to repay the remaining amount. The following table will show the most common terms for adjustable rate mortgage:

Common Adjustable Rate Mortgages
ARM Type Months Fixed
10/1 ARM Fixed for 120 months, and then annually adjusts.
7/1 ARM Fixed for 84 months, and then annually adjusts.
5/1 ARM Fixed for 60 months, and then annually adjusts.
3/1 ARM Fixed for 36 months, and then annually adjusts.
Mortgage amount
Value of the mortgage.
Starting interest rate
Annual rate of interest agreed initially when you entered the contract.
Term in years
Number of years it will take to repay the mortgage.
Current index
Interest rate of the ARM as mentioned in the index. The final and fully indexed rate is found by adding this current index rate and margin.
Percentage rate of interest above the set index, or the ‘margin’. This can be used to calculate the Fully Indexed Rate.
Starting monthly payment
The total amount of initial principal and interest. This is found by multiplying the initial interest rate and initial monthly payment.
Loan origination percent
Percentage rate charged to cover the loan origination costs.
Discount points
Spending 1% of the loan amount can get you one discount point. These points are tax deductible elements until utilized as broker’s commission.
Other fees
Prepaid interest and other fees and charges that has not been included so far.
Interest rate cap
The highest limit for charging interest rate. It’s impractical that the actual rate of interest will rise beyond this rate.
Months before first adjustment
The number of months you have to wait before you start adjusting your mortgage payment. These are the months with fixed rate of payments. Normally the rate is adjusted once in a year (12 months).
Expected adjustment
Your anticipated change in the interest rate of the mortgage. This rate will be adjusted with the initial interest rate.
Months between adjustments
This is the time between two subsequent mortgage adjustments. During this time you are unable to adjust your mortgage payments further.
Total payments
Total amount of monthly payments to fully pay off the loan. It is assumed by the calculator that you will not make any early payment of principal.
Total interest
Total amount of dollar expense as interest cost. This calculator assumes that, you will make all payments as per the schedule and there will be no prepayment.