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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (37430)	7/31/2005 8:12:51 PM
From: Ramsey Su	Respond to of 110194

Russ, your link answered your question. I would say most ARMs have a payment cap. loantech should have answer. Ramsey Payment Caps Some ARMs include payment caps, which limit your monthly payment increase at the time of each adjustment, usually to a percentage of the previous payment. In other words, with a 7½% payment cap, a payment of $100 could increase to no more than $107.50 in the first adjustment period, and to no more than $115.56 in the second. Let's assume that your rate changes in the first year by 2 pe rcentage points, but your payments can increase by no more than 7½% in any one year. Here's what your payments would look like: ARM Interest Rate Monthly Payment First year @ 10% $570.42 2nd year @ 12% (without payment cap) $667.30 2nd year @ 12% (with 7½% payment cap) $613.20 Difference in monthly payment = $54.10 Many ARMs with payment caps do not have periodic interest rate caps.