Understanding Your ARM Rate
An Adjustable-Rate Mortgage (ARM) can offer a lower initial interest rate compared to a fixed-rate mortgage. This can result in lower monthly payments during the initial fixed period. However, it's crucial to understand how the rate can adjust over time. The initial fixed-rate period is the duration you'll benefit from a stable interest rate.
After this period, the interest rate will adjust based on a financial index (like LIBOR or SOFR) plus a margin. The adjustment frequency determines how often your rate can change. The maximum rate increase per adjustment limits how much your rate can go up in a single adjustment period, and the lifetime rate cap sets the absolute highest interest rate your loan can ever reach.
This calculator provides an estimate of your initial monthly principal and interest payment. It does not account for property taxes, homeowner's insurance, or potential private mortgage insurance (PMI), which would increase your total monthly housing expense.
var calculateARM = function() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var initialInterestRate = parseFloat(document.getElementById("initialInterestRate").value);
var initialFixedPeriod = parseInt(document.getElementById("initialFixedPeriod").value);
var loanTerm = parseInt(document.getElementById("loanTerm").value);
var adjustmentFrequency = parseInt(document.getElementById("adjustmentFrequency").value);
var maxRateIncreasePerAdjustment = parseFloat(document.getElementById("maxRateIncreasePerAdjustment").value);
var lifetimeRateCap = parseFloat(document.getElementById("lifetimeRateCap").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(loanAmount) || isNaN(initialInterestRate) || isNaN(initialFixedPeriod) || isNaN(loanTerm) || isNaN(adjustmentFrequency) || isNaN(maxRateIncreasePerAdjustment) || isNaN(lifetimeRateCap)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (initialInterestRate < 0 || initialFixedPeriod <= 0 || loanTerm <= 0 || adjustmentFrequency <= 0 || maxRateIncreasePerAdjustment < 0 || lifetimeRateCap 0) {
initialPayment = (loanAmount * monthlyInterestRate) / (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments));
} else {
initialPayment = loanAmount / numberOfPayments;
}
var formattedInitialPayment = initialPayment.toFixed(2);
resultDiv.innerHTML = "
Estimated Initial Monthly Payment (Principal & Interest)
$" + formattedInitialPayment + "";
// This calculator focuses on the initial payment for simplicity and clarity,
// as predicting future adjustments accurately requires external index data and a more complex simulation.
// The core value of an ARM calculator is to understand the initial benefit and the potential for change.
};
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