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APR Calculator (18)

APR on Adjustable Rate Mortgages with Negative Amortization

Who This Calculator is For: Lenders, mortgage brokers, loan officers or borrowers who
need to calculate an APR on an Adjustable Rate Mortgage with Negative Amortization.

Enter the Following:
Basic Loan Information
  Loan Amount (do NOT include upfront mortgage insurance premium, if applicable)
  Initial Interest Rate on Loan  (e.g. 7.50)
  Points  (% of Loan)
  Loan Term (in months)
  Current Value of Property
Other Fees and Charges
  Loan origination fee
  Mortgage broker fee
  Tax/flood service (life of loan)
  Assumption fee
  Required credit life or disability insurance
  Mortgage insurance premium (monthly)
  Upfront Mortgage insurance premium ( input here if included in loan amount )
  Lock/commitment fee
  Other APR fees
Payment Information
  Initial Monthly Payment of Principal and Interest  (e.g., 753.45)
  Payment Adjustment Period, in Months  (e.g., 12)
  Payment Adjustment Cap, in Percent  (e.g., 7.5 - if no cap, leave blank)
  Payment Recast Period, in Years  (e.g., 5 - if no recast period, leave blank)
  Negative Amortization Cap, in Percent  (e.g., 110 - if no cap, leave blank)
Interest Rate Information
  Current Value of ARM Interest Rate Index  ( e.g. 1.54 )
  Margin That is Added to Interest Rate Index  (e.g. 2.75)
  Number of Months to First Rate Adjustment  (e.g. 36)
  Duration, in Months, Between Subsequent Rate Adjustments  (e.g. 12)
  Maximum Interest Rate Over Life of Mortgage  (e.g. 12.5)
  Minimum Interest Rate Over Life of Mortgage  (e.g. 4.5)


Note: Fees included in the APR are shown in Settlement Costs Included in Annual Percentage Rate, see the source cited there. The APR is a legal concept and while the Mortgage Professor believes that his calculations are consistent with the law, he is not a lawyer and does not warrant the results.
This is your marginal tax rate, the rate at which each additional dollar of income will be taxed. If you pay only Federal income taxes, it is the highest tax bracket you used when you calculated your taxes. Federal tax brackets currently are: 10%, 15%, 25%, 28%, 33%, and 35%. If you also pay state and/or local income taxes, these marginal rates can be added to the Federal rate. For example, if you had to pay 25% to the IRS and 5% to the state of Pennsylvania, your tax bracket is 30%. To perform a "pre-tax" analysis enter zero (0) as the tax rate. Select the specific index used by your ARM from the ARM disclosure form. To find its current value, see the sources in Adjustable Rate Mortgage Indexes. Slide mouse over yellow box at beginning of line to close pop-up. The amount that is added to the index value on a rate adjustment date. It is shown in the ARM disclosure form. Begin with the month in which the first payment is due. This is the number of months until the first rate adjustment. This is the maximum amount that the interest rate can change on the first rate adjustment. ARMs that have initial rate periods of 5 years or longer often have larger adjustment caps on the first rate adjustment than on subsequent adjustments. After the initial rate period, the rate on most ARMs changes every year, every 6 months, or every month. This affects the relative cost of ARMs because ARMs tend to have lower costs in the early years. Down payment as a percent of sale price or property value, whichever is lower. This affects the relative cost of ARMs because mortgage insurance premiums are higher on some ARMs. Any number up to 10 will be assumed to be a percent of the loan amount. Any number above 10 will be treated as a dollar amount. Be sure you do not include taxes, hazard insurance, or mortgage insurance. This affects the after-tax interest cost because on a purchase transaction points are fully deductible in the first year whereas on a refinance the deduction must be spread over the life of the loan, with the remaining portion of the deduction taken in the year the loan is paid in full. Given the down payment, term and mortgage type you have selected, the numbers shown are typical annual premium rates for "monthly premium plans" that involve no upfront premium. You can override these numbers if you are quoted different rates for monthly premium plans. This is the number of months the payment remains the same This is the largest percent increase or decrease in the monthly payment. It may be overridden at the end of a payment recast period, or in the event that the negative amortization cap is breached. At the end of each recast period, the payment of principal and interest will be recalculated to be fully-amortizing over the remaining term. The balance can never exceed this percent of the original loan balance. When it reaches that level, the payment is increased to the amount that will fully amortize the loan over the remaining term.