How APR is calculated on ARM Mortgages as Rate of interest over life of loan is not known?
for first fixed rate period, whether 3, 5, 7 years, the rate or APR is calculated based on assumption of 30 years term. Then at the end of fixed period, rate is adjusted, and new rated is calculated on remaining years. For example, if you have a new 5 years ARM with 6% rate, then you monthly payment of first 5 years is based on 6% over 30 years. at 6th year, if new rate is 7%, then your payment will be 7% over 25 year on remaining of your balance. and each year after rate is adjusted on market interest rate and remaining of your balance.
