Comparing Future Interest Rate Scenarios
This example shows how you can use our calculator to compare the impact of the best case, worst case and stable interest rate scenarios on an adjustable rate mortgage.
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The best case scenario is where the index rate goes to zero in the 2nd month and stays at zero for the duration of the mortgage. In the stable scenario, the index rate remains unchanged over the life of the loan. In the worst case scenario the index rate increases in the 2nd month to the maximum interest rate for the loan and stays there for the duration of the mortgage. When you generate the amortization schedules, you'll see that total payments made during the life of the loan are as follows -
best case: $371,912 stable: $503,434 worst case: $796,291.
As you can see the interest rates can make a dramatic difference.
Click on the Calculate button to generate a side by side comparison for this example or enter your own information or explore the other examples.
The Basics: The Floor Rate Matters Margin Makes a Difference Payment Shock
Interest Rate Caps are Important Comparing Future Interest Rate Scenarios
Common Loan Types: 1/1 ARM 3/1 ARM 5/1 ARM 7/1 ARM 10/1 ARM
Other Examples: 2/28 3/27 5/25
