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Refinance Calculator (3e)

Refinancing an ARM into a FRM to Lower Risk

Who This Calculator is For: Borrowers with a ARM, worried about rising interest rates,
trying to decide whether they should refinance into an FRM.

What This Calculator Does:This calculator compares the total cost of retaining
an existing ARM with that of refinancing into a new FRM, over a specified
future period. It allows the upfront refinance costs to be financed.


Information About Yourself
  Expected Years in House, Cannot Exceed Term
  Rate of Interest on Savings  (e.g. 3.5)
  Income Tax Bracket ( e.g. 27 )
  Current Value of House (e.g. 225000)
  Optional:  Expected Rate of Property Value Appreciation
Basic Loan Information Existing ARM New FRM
  Existing Loan Balance on ARM
  Current Interest Rate on ARM — New Interest Rate on FRM  (e.g. 6.00)
  Remaining Loan Term on ARM (in months) — New Loan Term on FRM (in months)
  Mortgage Insurance (Monthly Premium Plan)
  Points  ($'s or % of Loan)  
  All Other Closing Costs  
  Prepayment Penalty on ARM ($'s or % of loan balance — if applicable)  
  Points and Costs Are:  
Interest Rate Index
  Current Value of ARM Interest Rate Index  ( e.g. 1.54 )  
  Margin That is Added to Interest Rate Index  (e.g. 2.75)  
Next Rate Adjustment
  Number of Months to Next Rate Adjustment  (e.g. 36)  
  Maximum Interest Rate Change on Next Rate Adjustment  (e.g. 5.0)  
Subsequent Rate Adjustments
  Duration, in Months, Between Subsequent Rate Adjustments  (e.g. 12)  
  Maximum Int Rate Change on Subsequent Rate Adjustments  (e.g. 2.0)  
Maximum / Minimum Rates
  Maximum Interest Rate Over Life of Mortgage  (e.g. 12.5)  
  Minimum Interest Rate Over Life of Mortgage  (e.g. 4.5)  
Assumptions About Future Interest Rates ( ARM Only - Only 2 selections allowed per run )
 Stable Index:           Interest Rate Index Stays Unchanged for Life of Mortgage
 Worst Case:            Interest Rate Rises to the Maximum Allowable Rate in the Second Month
   Annual Change
to Begin in Year
x Years
Per Year
 Upward Movement:         Int Rate Index Rises for:
 Downward Movement:     Int Rate Index Declines for:
  Years Between
Direction Changes
Percent Change
Per Year
Volatile:                  Interest Rate Index Rises, Then Declines:
 Volatile:                  Interest Rate Index Declines, Then Rises:


This is your marginal tax rate, the rate at which each additional dollar of income will be taxed. If you pay only Federal income taxes, it is the highest tax bracket you used when you calculated your taxes. Federal tax brackets currently are: 10%, 15%, 25%, 28%, 33%, and 35%. If you also pay state and/or local income taxes, these marginal rates can be added to the Federal rate. For example, if you had to pay 25% to the IRS and 5% to the state of Pennsylvania, your tax bracket is 30%. To perform a "pre-tax" analysis enter zero (0) as the tax rate. The period cannot exceed the shortest mortgage term. The period may be stated in fractions. For example, 25 years and 1 month would be entered as 25.083, 25 years and two months would be 25.167, and 25 years and 3 months would be 25.25, etc. All settlement costs that might differ between any two deals. This includes all lender fees of any sort, and all third party fees (such as title insurance, apprraisals and credit report), but excluding charges of governments which cannot vary from one deal to another. Do not include escrow reserves for taxes and insurance, or prepaid (per diem) interest. Select the specific index used by your ARM from the ARM disclosure form. To find its current value, see the sources in Adjustable Rate Mortgage Indexes. Slide mouse over yellow box at beginning of line to close pop-up. The amount that is added to the index value on a rate adjustment date. It is shown in the ARM disclosure form. Begin with the month in which the first payment is due. This is the number of months until the first rate adjustment. This is the maximum amount that the interest rate can change on the first rate adjustment. ARMs that have initial rate periods of 5 years or longer often have larger adjustment caps on the first rate adjustment than on subsequent adjustments. After the initial rate period, the rate on most ARMs changes every year, every 6 months, or every month. This affects the relative cost of ARMs and FRMs because ARMs tend to have lower costs in the early years. Down payment as a percent of sale price or property value, whichever is lower. This affects the relative cost of ARMs and FRMs because mortgage insurance premiums are higher on some ARMs. Any number up to 10 will be assumed to be a percent of the loan amount. Any number above 10 will be treated as a dollar amount. You can safely leave out any expenses expressed as a percent of the loan which are the same for the FRM and ARM, such as title insurance or transaction taxes. If the FRM and ARM loan amounts are the same, you can also leave out any dollar expenses which are the same for both mortgages, such as charges by escrow agents for closing services. This affects the after-tax interest cost because on a purchase transaction points are fully deductible in the first year whereas on a refinance the deduction must be spread over the life of the loan, with the remaining portion of the deduction taken in the year the loan is paid in full. Given the down payment, term and mortgage type you have selected, the numbers shown are typical annual premium rates for "monthly premium plans" that involve no upfront premium. You can override these numbers if you are quoted different rates for monthly premium plans. Enter 1 if you want the rate increase to begin immediately, 2 if you want it to begin at the start of year 2, and so on.