Fixed -vs- Adjustable Rate Calculator
Our fixed rate loan vs. adjustable rate loan calculator is a smart
way to choose which one is right for you. The interest rate for
a fixed rate loan stays the same for the life of the loan. But with
an adjustable rate mortgage (ARM), the interest rate fluctuates
periodically based on an index like the U.S. Treasury Security Yields
(1 Year T Bill), the Cost of Funds Index (COFI) and the London Inter-Bank
Offer Rate (LIBOR).
ARMs are attractive to home buyers because generally offer a lower
initial interest rate than a fixed rate mortgage. This saves you
more money up front and, if interest rates remain stable or decrease,
can save you more money overall. Buyers also might be able to qualify
for a larger loan amount. Do not forget that there is always the
risk of rates going up. That is why it is important to look at the
index against which your interest rate will be measured, as well
as the historical and predicted growth or decrease of that index
when you compare fixed verses adjustable rates. Margins are also
an important factor, especially when comparing loans between lenders.
- Enter ballpark values by clicking on and dragging the diamond-shaped
sliders left or right. Enter exact numbers by clicking on the
number in the box on the right and type your number (no commas).
- Click on tabs for details and for more options.
General Loan Information
Loan Amount
You should enter the amount of money you plan to borrow.
Loan Term
This is the number of years you will have to pay back the money
that you borrow. Usually loan terms last 15 or 30 years.
Fixed Rate Loan Information
Fixed Rate
If you know the interest rate you will receive for the fixed loan
you can enter it here, or enter one based on current market rates.
Adjustable Rate Loan Information
Initial Rate
Enter the interest rate for the adjustable loan's initial period.
This rate is sometimes called the teaser rate.
Initial Period
During the initial period, typically 1, 3, 5, or 7 years long, your
interest rate will not fluctuate and is usually set lower than the
current fixed rate.
Adjustable Period
Your adjustable period will be the amount of time between changes
in your interest rate. Most often the interest and monthly payment
will change every 1, 3, 5, or 7 years, but can change monthly on
some loans.
Period Cap
A period cap determines how much the adjustable rate can increase
or decrease during the adjustable period of your loan. For example,
if your adjustable period is 1 year and your adjustable cap is 2%,
your interest rate cannot increase or decrease more than 2% each
year.
Lifetime Cap
Like the adjustable cap, this is a limit set on interest rates,
but this cap is the maximum increase you will receive over the lifetime
of the loan. If you have your loan for 15 years and your lifetime
cap is 6%, your interest rates cannot increase more than a total
of 6% over the loan's starting rate during this 15 year period.
Current Index Rate
The index is a published interest rate used as a base interest rate
on an adjustable rate loan. Typical indexes are the U.S. Treasury
bill index, LIBOR (London Inter-Bank Offered Rate), or the COFI
(Cost of Funds Index). Enter the value of your current index rate.
Margin
Margins are the percentage points your lender will add to the index
before determining the final adjustable rate. Most likely the margin
will not change over the life of the loan but can vary from lender
to lender.
Yearly Index Change Estimate the number of percentage points the
selected index will rise or fall or ask your lender.
Payment Graph Tab
Our Payment Graph Tab uses all of the information that you have
provided to compare your fixed vs. your adjustable monthly payment
over 10 years in our easy to understand line chart.
Comparison Tab
You can use the interactive table on our Comparison Tab to see the
differences between the fixed and adjustable rate options. By moving
the Years in Home slider you can see the values for monthly payment,
maximum monthly payment, interest paid, equity built, loan balance
and total paid for the number of years in each row.
Click
Here to open the Fixed vs Adjustable Rate Calculator
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