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ARM loan

Hi,

I have a question about ARM loan.
Say I got ARM loan for seven years. On those years the loan is fix rate.
After that the rate is changing based on the market rate and the index that I chose at the very beginning.
But how do I know how the allocation between the interest and the principal? thus, how much I paid from the principal already during the ARM loan and then how much left each mount at the remaining 23 years of the loan?

Thank you,

Yossi
  • May 22 2011 - Cupertino
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Answers (4)

Yossi, what you are looking for is called an Amortization Schedule.

http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx is a pretty good one.  Enter in the variables (loan amount, interest rate) and hit Calculate.  Then below add in any extra payments (or not) and then hit Show/Recalculate Amortization Table and you'll get a breakdown of each month's payment amount, principal paid, interest paid, total interest paid up to that date, and also what the remaining principal balance is.

It only does fixed rate terms, not adjustable rate terms, so just count 7 years into it and then that is where you'll be if you stick to your plan.
  • May 22 2011
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You probably want to keep your ARM till the last minute as if you refinance to a fully amortized loan you will have a little payment shock. If you recently purchased then in the years left, hopefully your equity has gone up at the end of the seven years to give a refinance option as you can't do any refinance while upside down in equity. Hopefully you are not to upside down as there is a 50% possiblility you are.
  • May 29 2011
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You should receive a monthly statement showing how much you pay for interest and what portion of your payment is deducted from your principal.

At the end of the 7 years, your ARM will adjust per the CAP, based on the principal balance of the loan at that time.  Thereafter, depending on the ARM you get, there will be an adjustment going forward, every 12 months, or so.

ARMS can be a blessing and they can just as easily be a curse.  Excercise caution and understand fully what you're getting into before you select the form of financing.
  • June 08 2011
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Yossi,

You will only be able to compute the first seven years accurately with an amortization calculator. From year eight forward you rate may change every year. Thereby, the remaining 23 years will be an approximation.

Happy funding, Rudi
  • June 08 2011
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