What do you mean by Adjustable Rate Mortgage ?
Adjustable Rate Mortgage refers to the computation of the periodical installment amount wherein interest rate changes after fixed intervals throughout the borrowing period. It starts with an initial fixed interest rate period, during which the interest rate remains constant. This period is often set for a certain number of years, such as 3, 5, 7, or 10 years. After the initial fixed period, the interest rate on the ARM may adjust periodically. The adjustment period is the interval at which the interest rate changes, typically once per year, although it can vary depending on the terms of the loan. Adjustable rate mortgages offer both advantages and risks. The initial fixed-rate period often provides lower initial interest rates compared to fixed-rate mortgages, making them beneficial to borrowers who plan to sell or refinance before the first rate adjustment. However, borrowers should be aware of the potential for higher payments if interest rates rise after the initial period ends.
How to Calculate Adjustable Rate Mortgage?
Adjustable Rate Mortgage calculator uses Adjustable Rate Mortgage = ((Loan Amount*Rate of Interest per Annum)*(1+Rate of Interest per Annum)^(Number of Periods))/((1+Rate of Interest per Annum)^(Number of Periods-1)) to calculate the Adjustable Rate Mortgage, Adjustable Rate Mortgage is the interest rate that adjusts based on a predetermined index or benchmark rate. Adjustable Rate Mortgage is denoted by ADRM symbol.
How to calculate Adjustable Rate Mortgage using this online calculator? To use this online calculator for Adjustable Rate Mortgage, enter Loan Amount (P), Rate of Interest per Annum (R) & Number of Periods (np) and hit the calculate button. Here is how the Adjustable Rate Mortgage calculation can be explained with given input values -> 87360 = ((100000*0.56)*(1+0.56)^(4))/((1+0.56)^(4-1)).