Two figures in, a clear answer out. The mortgage rate calculator uses annual fee, up-front fee, expected adjustment, periods between adjustments, interest rate cap, interest rate floor, first adjustment after…, expected interest rate at the last period, loan balance, var int adj, var type, m, q, mortgage rate and mortgage term to produce adjusted mortgage rate (apr), monthly payment minimum and monthly payment maximum, applying the standard relationship for this problem in the order the calculation actually needs it.
What Is the Mortgage Rate Calculator?
The mortgage rate calculator takes annual fee, up-front fee, expected adjustment, periods between adjustments, interest rate cap, interest rate floor, first adjustment after..., expected interest rate at the last period, loan balance, var int adj, var type, m, q, mortgage rate and mortgage term and turns them into adjusted mortgage rate (apr), monthly payment minimum and monthly payment maximum.
It is the kind of calculation you would otherwise do on the back of an envelope: mechanical, repeatable and easy to get subtly wrong without noticing.
How the Mortgage Rate Figure Is Built
Each result is calculated from the ones before it, so the working is fully visible. That matters when the answer is going to be quoted to somebody else and you need to be able to explain where it came from.
The figures are exactly as good as the assumptions underneath them. Check the rates, the periods and the tax treatment before you rely on the result.
Reading the Result Sensibly
A small change in an input can move the result by much more than you would expect, particularly where the calculation divides by one of the figures you supplied. That is worth understanding before you rely on a figure.
For anything that will be committed to, write the inputs down beside the result. A number you can reproduce is worth far more than one you cannot explain.
A Worked Example
Working through an example, with annual fee set to 10, up-front fee set to 5, expected adjustment set to 2, the calculator returns mortgage points of 0.5, and monthly payment of 10.55, and adjusted mortgage rate (apr) of 21.67. Substitute your own figures and the same steps produce the same kind of answer.
Frequently Asked Questions
What do I need to work out adjusted mortgage rate (apr)?
Enter annual fee, up-front fee, expected adjustment, periods between adjustments, interest rate cap, interest rate floor, first adjustment after..., expected interest rate at the last period, loan balance, var int adj, var type, m, q, mortgage rate and mortgage term. The calculator then works through the relationship and reports adjusted mortgage rate (apr), monthly payment minimum and monthly payment maximum.
What does the mortgage rate actually calculate?
It takes annual fee, up-front fee, expected adjustment, periods between adjustments, interest rate cap, interest rate floor, first adjustment after..., expected interest rate at the last period, loan balance, var int adj, var type, m, q, mortgage rate and mortgage term and converts them into adjusted mortgage rate (apr), monthly payment minimum and monthly payment maximum using the standard relationship for this problem. Each step is applied in turn, so every output is traceable back to the numbers you typed in.
How should I enter annual fee?
Use the value you actually have, in the unit shown next to the field. Enter every value in the same unit system. The calculator assumes the figures you supply are consistent, so it cannot correct a mistake that happens before the calculation starts.
Can I use this for a quick estimate as well as a precise answer?
Yes. The calculator is built for quick checks, so round your inputs to a sensible number of significant figures and the result will be just as useful. If you need more precision, keep the same method and add digits to the inputs rather than adjusting the method itself.
Is the answer exact?
It is as exact as the formula and the inputs allow. The method itself is the standard one for this problem, so the only sources of error are the figures you enter and the precision you ask for.