Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I know that I can readily print out an amortization table for a 20 year FIXED rate mortgage and, easily, see the remaining Principal Balance for every month of the 20 years. ---Now, let's assume I have a 20 year (term) 5/1 ARM --and, let's say that after the first 5 years, the interest rate jumps up to an additional 1% for that year --- Question: Does the PrincipalReduction stay the same as if it were a 20 year fixed rate mortgage? ---I know it's a pretty basic question ---but I am not certain of the answer (I know the P&I payment will increase because of the increase in interest rate) . Thanks for any help. --jaes.
Does the PrincipalReduction stay the same as if it were a 20 year fixed rate mortgage? [/font]
No, as the interest rate goes up, the principal reduction goes down. Your payment #61 will increase and less money will go towards principal reduction. To see the amount going to principal, use a 15 amortization table with the remaining balance after year 5.
Wow. I don't understand how that works. Now, from the start I am not arguing the point ---I am just needing education. From my ignorant point of view I would have thought they would have taken the principal balance at start of month #61, charged the higher interest rate, but continued the principal reduction over a 20 year period. Again I am not arguing ---I am just trying to understand how it works and the rational. If there is an easy explanation for the rational, I would thank you for taking the time to explain what must be elementary to those in the business. ---jaes.
First, thank you thelopez2 for the quick reply ----I should have read your response more carefully --you mentioned how the loan would be amortized over 15 years at year #61. ----that explains it . then, I would assume, that because the ARM is a 5/1, at the start of year #62, I would go the a 14 year amortization schedule (with new interest rate and the principal balance entered to produce the new amortization table) ---and so on for following years. --Is that correct? ---jaes.
First, thank you thelopez2 for the quick reply ----I should have read your response more carefully --you mentioned how the loan would be amortized over 15 years at year #61. ----that explains it . then, I would assume, that because the ARM is a 5/1, at the start of year #62, I would go the a 14 year amortization schedule (with new interest rate and the principal balance entered to produce the new amortization table) ---and so on for following years. --Is that correct? ---jaes.
At payment #61 not year 61.
The payment would be adjusting every 12 months after that #61, #73, #85, etc.
Payment #73 will have 14 years left.
Payment #85 will have 13 years left.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
