How to Calculate Mortgage Payments on Variable Payments
Variable rate mortgage loans are those whose rates fluctuate from month to month. These loans are often tied to an index -- like the Prime Rate or the LIBOR (London InterBank Offered Rate) -that determines what your new rate will be. Calculating your mortgage payment is relatively simple as long as you know what the rate will be. To determine what your rate will be, you'll need to review your mortgage paperwork.
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Instructions
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Pull out your mortgage documents. Pay special attention to the Loan Agreement, Revolving Rate Rider, and the Mortgage documents. These will break down the details for the variable rate and its adjustments.
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Look for two words: Margin and Index. A margin is a set number which you'll need to add to the Index to determine your rate. For example, if your margin is 4.00 percent, and your index is the Prime Rate, you'll need to add 4.00 percent to whatever the Prime Rate is at the moment. See Resources for a breakdown of popular index rates.
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Look for adjustment dates. This will likely be in the Loan Agreement. This section will tell you when your mortgage will adjust to a new rate and how often it will continue to adjust. Many variable rate loans have period of time after closing during which the rate is fixed. After this, rates often adjust monthly.
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Determine when your next adjustment will be. Indexes update each month. Look at your index and add your margin to this number. This is your new rate.
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Calculate your new mortgage payment. See Resources for a mortgage payment calculator. Plug in all the necessary information (mortgage balance, rate and term). This will calculate your new payment based on the variable rate.
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