How to Calculate a VA ARM (Adjustable Rate Mortgage)
- 1). Look for the following documents in your package of mortgage paperwork you received when you closed your VA loan: Adjustable Rate Rider, Adjustable Rate Note and Mortgage Note. You may not have all of these, but you will either have a Mortgage Note or an Adjustable Rate Note.
- 2). Look for the following terms on the Mortgage Note or Adjustable Rate Note: margin, index, ceiling and floor. The margin on an ARM loan is a fixed rate that is added to the index to calculate your new mortgage rate. An index is a fluctuating rate. Common indexes are the Prime Rate and the LIBOR (London InterBank Offered Rate). The ceiling and the floor are the maximum and minimum, respectively, to which your mortgage rate can adjust.
- 3). Find the current value of your index rate. Use either a current copy of the Wall Street Journal or the Bankrate site listed in Resources. Indexes can potentially adjust each month, so you must have the most recent index rate to calculate your VA mortgage.
- 4). Add your margin to your index. So long as this rate is higher than the floor rate and lower than the ceiling rate (as listed on your Mortgage Note), this will be your new VA mortgage rate. Make sure to review your Mortgage Note to find out when and how often this VA rate will change. (In most ARMs, the mortgage rate will adjust on the first of the month, each month.)
- 5). Use the calculator in Resources to determine your new VA mortgage payment. Fill in the remaining balance on your VA loan using your most recent mortgage statement. Use the new rate you've calculated in Step 4. Make sure to fill in the remaining term (length) of the loan. You must subtract the number of payments you've already made on your mortgage, expressed in years.
