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Fixed and ARM Loans

Note that we can now compare loans that are 30 or 40 years in length. Adjustable Rate loans are available in both loan lengths.

A fixed rate mortgage may be just what you are looking for if you like the idea of stability. But at what cost is this rate insurance? By comparing the 30-year fixed loan with hybrid ARM loans, you can see how you could save plenty if your plan is to remain with the loan just during the time of the initial fixed interest rate. Plus, you can also keep the loan past the initial period if the then current rate continues to suit your needs.

Compute Interest-only versus Conventional Payments

This report is a sample report illustrating the cost/savings differences between loan scenarios. Remember, 96.5% of the currently outstanding mortgages are refinanced (or the home is sold) within 7 years. Based on an intended move or a refinance within the next 7 years, the calculations show those differences at the end of the 7th year.

The 30 year fixed mortgage, used as a baseline scenario, is shown in the leftmost column. All ARM index projections begin on the first payment date of the respective loan.

What could you do with the monthly savings? For one, you can use it simply to more quickly pay down the mortgage principal. Or, you could use it for an annual vacation, a new car, home repair, or to pay for college. Makes you think, doesn't it?

LOAN SUMMARY

30 YR Fixed

3/1 ARM

5/1 ARM

7/1 ARM

Loan Type
Rate Type
Loan Amount
Interest Rate
Index + Margin
ARM Index projection
Projected Int. Rate @ Yr. 7
Loan Term
APR (est.)

Conventional
Fixed
$125,000.00
5.750%

5.750%
30 Years
6.040%

Conventional
ARM
$125,000.00
4.125%
2.320 + 2.250%
Historical
7.50%
30 Years
4.767%

Conventional
ARM
$125,000.00
4.750%
2.320 + 2.250%
Historical
7.50%
30 Years
4.939%

Conventional
ARM
$125,000.00
5.250%
2.320 + 2.250%
Historical
5.25%
30 Years
5.210%

Monthly Pmt Summary

30 YR Fixed

3/1 ARM

5/1 ARM

7/1 ARM

The starting monthly payment for each scenario is shown below.

Principal and Interest
Mortgage Insurance
Taxes
Hazard/Other Insurance
Total Monthly Payment
PAYMENT SAVINGS
Total Savings Ending Yr 7

$729.47
$0.00
$91.67
$36.46
$857.60

$605.81
$0.00
$91.67
$36.46
$733.94
$123.66
$642.84

$652.06
$0.00
$91.67
$36.46
$780.18
$77.41
$1,054.44

$690.25
$0.00
$91.67
$36.46
$818.38
$39.22
$3,294.48

Annual Pmt Comparison

30 YR Fixed

3/1 ARM

5/1 ARM

7/1 ARM

The projected monthly payment at various points in time is shown below.

Proj. Pmt. Ending Yr. 1
Proj. Pmt. Ending Yr. 2
Proj. Pmt. Ending Yr. 3
Proj. Pmt. Ending Yr. 4
Proj. Pmt. Ending Yr. 5
Proj. Pmt. Ending Yr. 6
Proj. Pmt. Ending Yr. 7

$857.60
$857.60
$857.60
$857.60
$857.60
$857.60
$857.60

$733.94
$733.94
$733.94
$794.00
$937.42
$1,040.51
$975.56

$780.18
$780.18
$780.18
$780.18
$780.18
$1,039.48
$974.90

$818.38
$818.38
$818.38
$818.38
$818.38
$818.38
$818.38

Estimated Cash From/To

30 YR Fixed

3/1 ARM

5/1 ARM

7/1 ARM

Refinance/Debts Paid Off
Prepaids/Impounds
Charges/Fees
Discount Points
Total Settlement
Loan Amount
Cash To Borrower

$77,900.00
$675.52
$3,987.50
$0.00
$82,563.02
($125,000.00)
$42,436.98

$77,900.00
$557.03
$3,987.50
$0.00
$82,444.53
($125,000.00)
$42,555.47

$77,900.00
$602.60
$3,987.50
$0.00
$82,490.10
($125,000.00)
$42,509.90

$77,900.00
$639.06
$3,987.50
$0.00
$82,526.56
($125,000.00)
$42,473.44

COST/BENEFIT SUMMARY

30 YR Fixed

3/1 ARM

5/1 ARM

7/1 ARM

The net cost takes into consideration the many costs of a loan including interest, discount points, closing costs, and mortgage insurance (if applicable). The net benefit assumes that any monthly payment savings are consumed (not applied as extra payments or invested). All values shown are at the end of year 7.

Interest Paid
Closing Costs
Net Cost to Borrower
Principal Paid
A. Net Cost Savings
B. Add'l Principal Paid Off
C. 7 Year Net Benefit (A+B)

Loan Balance Ending Yr. 7

$48,236.27
$4,352.50
$52,588.77
$13,458.48

$111,541.52

$47,274.33
$4,352.50
$51,626.83
$13,659.09
$961.94
$200.61
$1,162.55
SAVINGS
$111,340.91

$46,780.88
$4,352.50
$51,133.38
$13,786.51
$1,455.39
$328.03
$1,783.42
SAVINGS
$111,213.49

$43,847.25
$4,352.50
$48,199.75
$14,516.56
$4,389.02
$1,058.08
$5,447.10
SAVINGS
$110,483.44

Cost/Benefit Comparison

30 YR Fixed

3/1 ARM

5/1 ARM

7/1 ARM

For each respective scenario, savings (with respect to the baseline) are shown in green and increases are enclosed in parenthesis and shown in red. The net benefit assumes that any monthly payment savings are consumed (not applied as extra payments or invested).

Net Benefit Ending Yr. 1
Net Benefit Ending Yr. 2
Net Benefit Ending Yr. 3
Net Benefit Ending Yr. 4
Net Benefit Ending Yr. 5
Net Benefit Ending Yr. 6
Net Benefit Ending Yr. 7

$2,694.03
$5,260.77
$7,815.13
$9,009.37
$7,273.11
$3,618.39
$1,162.55

$1,643.38
$3,211.26
$4,774.44
$6,330.56
$7,877.06
$4,231.68
$1,783.42

$815.90
$1,595.14
$2,373.06
$3,148.56
$3,920.30
$4,687.00
$5,447.10

Equity Comparison

30 YR Fixed

3/1 ARM

5/1 ARM

7/1 ARM

Based on an annual appreciation of 0% the estimated property value at the end of year 7 will be $206,000.00. The total equity at various points in time is shown below.

Equity Ending Yr. 1
Equity Ending Yr. 2
Equity Ending Yr. 3
Equity Ending Yr. 4
Equity Ending Yr. 5
Equity Ending Yr. 6
Equity Ending Yr. 7

$82,608.09
$84,311.11
$86,114.67
$88,024.71
$90,047.53
$92,189.77
$94,458.48

$83,153.90
$85,398.33
$87,737.11
$89,862.67
$91,496.28
$92,908.68
$94,659.09

$82,928.86
$84,951.36
$87,072.05
$89,295.69
$91,627.30
$93,038.13
$94,786.51

$82,762.49
$84,619.81
$86,577.01
$88,639.48
$90,812.85
$93,103.12
$95,516.56

The data provided above is deemed to be accurate, however, certain variables are time sensitive and will vary from lender to lender. Any information provided is an estimate only. Rates, points, terms, and fees are subject to change without notice and subject to creditworthiness of the borrower(s). The information above might not include any prepayment penalties.

If you'd like a report like this with your loan data, all you have to do is Apply for a Loan.

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