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## #1 2013-06-06 04:56:46

mom
Member
Registered: 2012-04-25
Posts: 94

### figuring mortgages

I am writing a college paper on purchasing property. I have to include an excel spreadsheet on two different options. I understand how to do the fixed rate. It is easy. I am totally lost on the variable rate and I don't know how to begin to explain it. I have the following:

5/1 ARM (variable rate)
Interest rate    2.250%
APR        2.763%
Points        1.117
Closing costs    \$12,410.97
Monthly pymnt    \$1,529

7/1 ARM (variable rate)
Interest rate    2.750%
APR        2.897%
Points        0.825
Closing costs    \$11,282.99
Monthly pymnt    \$1,633

10/1 ARM (variable rate)
Interest rate    3.375%
APR        3.288%
Points        1.209
Closing costs    \$12,778.96
Monthly pymnt    \$1,768

Your results are based on the purchase of a home in ZIP code 22310, with an estimated purchase price of  \$499,990 and an estimated down payment of  \$99,998.

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## #2 2013-06-06 06:18:18

johnnie
Guest

### Re: figuring mortgages

Figuring interest for a short period of time is done with intervals.
Each interval, you probably just take the amount currently
owed and multiply it by 1.00 or "One" point Zero, Zero, Zero, Plus
you have to add in the interest rate for that interval.
So if the interest rate for that interval is X%, but the interval is
one 365th of the interest rate period, then divide X% by 365.
then you have interest rate for that small interval.  Then add
the (X% / 365e.g.) to the 1.00000 or 100% and multiply that
by the amount owed at that time.

Say the interest rate is 22%, really high, but the interval is
an eleventh of a year, then 22% / 11 is 2% for that interval.
So 1.0000 + 2% = 1.02000 and use that to multiply by the
amount owed.

## #3 2013-06-06 10:13:06

mom
Member
Registered: 2012-04-25
Posts: 94

### Re: figuring mortgages

johnnie,

thanks. I did figure it out. the 5/1 ARM is five year fixed rate and interest and payments change according to the market changes. The market declines, the interest and payments decline. The market increases - so do the payments and interest. The lender sets a floor and ceiling on the percentage and at the end of the term there is a balloon payment.

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## #4 2013-06-07 02:13:51

johnnie
Guest

### Re: figuring mortgages

I'm glad you learned what you need to know.
I'll have to look up balloon payment.
I've heard of it, but don't know what it is.

## #5 2013-06-07 02:16:50

johnnie
Guest

### Re: figuring mortgages

oh yes.  I looked up balloon payment and i see it is
the final larger payment to finish off the debt.
Weird idea really.

## #6 2013-06-08 02:35:20

mom
Member
Registered: 2012-04-25
Posts: 94

### Re: figuring mortgages

yeah, I think that I would prefer a fixed rate. After doing an amortized schedule for a variable rate, the balloon payment turned out pretty big. In fact it was bigger than the down payment.

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## #7 2013-06-08 06:07:16

johnnie
Guest

### Re: figuring mortgages

Wow, are you sure you did it right?  That might be terrible if you get through all the payments but can't make the final payment.  That would be a bad day.