Principal The portion of your mortgage payment that is used to pay down the current balance of your mortgage. This can occur on adjustable rate mortgage when interest rates rise sharply, on interest-only mortgages when the interest-only period ends, and on balloon mortgages when the balloon payment is due. Payment Shock Occurs when the required minimum payment for a mortgage increases significantly. It should be clearly specified in your loan documents. The margin typically is fixed for the life of the loan. Interest rate caps and the floor rate for your mortgage may limit how much your actual interest rate changes. Margin When an ARM adjusts the margin is added to the index rate to help determine your interest rate. Loan Amount The initial principal balance or your mortgage at closing. The adjustable rate mortgage calculator shows you how your payment changes in the best case where rates are set at the minimum for your mortgage, the worst case where rates are set at the maximum for your mortgage, and the stable case where rates remain constant for your mortgage. Interest Rate Scenarios To decide if an adjustable rate mortgage is right for you, you should how changes in interest rates will effect the mortgage. There also may be a maximim overall cap on interest rate increases during the life of your loan. The cap for the first adjustment period may be different than the cap on subsequent adjustments. Interest Rate Caps Limits how much your interest rate can be increased during each adjustment period for an ARM. For example, the interest rate on a mortgage could be fixed for 2 years followed by adjustments every 6 months. Your interest rate may have a fixed period where it does not change followed by adjustements on a regularly scheduled basis. Interest Rate Adjustments The interest rate changes on an adjustable rate mortage (ARM) during adjustment periods specified in your loan documents. Interest-Only Mortgages come in a wide variety of types, including both fixed and adjustable rate mortgages. However, the borrower is taking on more risk since the balance is not being paid down. Required mortgage payments can be significantly lower during the interest-only period since the borrower is not required to pay down the principal balance during that time. Interest Only Interest-only mortgages allow borrowers to make interest-only payments for a specific period of time. The Total Interest for a mortgage is the sum of all interest paid over the life of a loan. Interest The portion of your mortgage payment that is due to the interest rate being applied to the principal balance. Common indexes used for setting mortgage rates have include the Prime Rate, Libor (London Interbank Offer Rate) and U.S. ![]() They should be published and widely available. Index Rate Rate Adjustment on ARMs are based on the index rate, the margin, the adjustment schedule, interest rate caps, and floor rate specified in your loan documents. ![]() Floor Rate Floor rate is the minimum interest rate for an adjustable rate mortgage (ARM). ![]() ยป Interest-Only Mortgage? Mortgage Calculator - Help Amortization Schedule The amortization schedule show you how monthly principal and interest payment and principal balances change over the life of your loan.
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