What Payment Do I Use To Calculate My Option Arm For A Modification?
March 16th, 2010
We recently attended one of your classes and it was great. There was one question that we did not get answered. We have an option ARM loan and make the interest only payment. Chris said that when calculating your monthly housing expenses that you do not use the interest only amount.Can you tell us which amount we do use. Thank You.
You need to use what is known as the Fully Indexed Rate. The simple thing to do is look at your payment coupon and look for the thirty year, fully indexed payment.
Also, on your Promissory Note, your loan was tied to an index (MTA, or Monthly Treasury Average, of perhaps the COFI, Cost of Funds Index) plus a margin. If you know your index, you can see its current value by clicking here: http://mortgage-x.com/general/mortgage_indexes.asp
Once you know this, then you add to it the margin described in writing on your Promissory Note. It will most likely be somewhere between, 2.5 and 3.5. So, if your index is 1.5 and your margin is 3.5, your fully indexed rate will be 5%.
From here, you’ll simply need to go on line and use any mortgage calculator and put in the balance owed, the remaining term and this interest rate to get pretty close. A HUD approved counselor can help you with this.