October 7th, 2007 12:19 PM by Sam Kader
In order for you to calculate what your Adjustable Rate Mortgage will adjust to, you need to find out the following items:
Example 1.
If your current ARM is 3%, Index Rate is 5%, Margin is 3%, Adjustment Cap is 4% and Lifetime Adjustment Cap is 12%. Then the new rate is 7% (Current + Adjustment Cap).
Example 2.
If your current ARM is 5%, Index Rate is 5%, Margin is 3%, Adjustment Cap is 4% and Lifetime Adjustment Cap is 12%. Then the new rate is 8% (Margin + Index).
Example 3.
If your current ARM is 6%, Index Rate is 5%, Margin is 8%, No Adjustment Cap and Lifetime Adjustment Cap is 12%. Then the new rate is 12% which is the maximum Lifetime Adjustment.
In the above examples, we are to consider the lower of the two from the following calculations:
a) Current Rate + Adjustment Cap or
b) Margin + Index.
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