This equation can calculate and produce an Amortization payment schedule for an adjustable Rate Mortgage  The equation can calculate the interest and Principal due for each month of the loan period.

INPUTS

This equation will take as input loan information:

• P - original loan amount (starting principal)
• `i` - the interest rate as a percentage
• n - loan term in years
• Choice - choice of which variable to report: interest, principal, or combined interest and principal
• pay_num - number of payment in amortization schedule that you want to query
• Adjust Month - the number of the month at which the rate is first adjusted
• Annual Rate Adjustment - the percentage amount the rate is adjusted each year

The equation will output the Interest or Principal or Combined portions applied for that payment number in the Amortization payment period.

Notes

The Adjustable Rate Mortgage is typically defined as a mortgage that starts with a specified fixed interest rate for a period.  During this period defined by the input, Adjust Month, the interest rate remains as it was at the start of the loan.

After some number of monthly payments, Adjust Month, the interest rate begins to adjust upward on an annual basis.

The amortization table that can be generated by this equation will show, for each payment period of a loan, the payment amount that is applied to the principal or  the amount paid as interest or the combined principal and interest.

For a mortgage the payment in the beginning is applied more to interest than to the principal.  As the loan matures,  the payment amount each month applied to principal increases, and the amount paid as interest decreases.

This equation can be used to calculate an amortization table and return as a result the requested value (Interest or Principal) for each requested payment period.

The equation will allow you to choose the Interest paid for that payment period,  the payment amount applied as Principal,  or the Combined (total) payment for that period.

REFERENCE

[1] savings and mortgage
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URL: savings and mortgage
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