How to Calculate Payment for an ARM
- 1). Divide the annual interest rate by 12 to find the monthly interest rate. For example, if the annual interest rate equals 7.92 percent, divide 0.0792 by 12 to find the monthly rate on your ARM equals 0.0066.
- 2). Add 1 to the monthly ARM interest rate. In this example, add 1 to 0.0066 to get 1.0066.
- 3). Raise the result to the opposite of the number of payments remaining on your adjustable rate mortgage. In this example, if you have 240 payments remaining on your ARM, raise 1.0066 to the -240th power to get 0.206223306.
- 4). Subtract the result from 1. In this example, take away 0.206223306 from 1 to get 0.793776694.
- 5). Divide the ARM monthly interest rate by the result. In this example, divide 0.0066 by 0.793776694 to get 0.008314681.
- 6). Multiply the result by the balance of your ARM to find the monthly payment. In this example, if you still owe $221,000, multiply 0.008314681 by $221,000 to find your monthly payment equals $1,837.54.
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