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How this calculator works
The calculator is designed to show its work. Rate rounding, contractual limits, balance projection, and payment recasting are separate steps so each can be tested independently.
Supported calculation
The model covers ordinary, fully amortizing adjustable-rate mortgages with monthly principal-and-interest payments. Existing Loan mode starts from a current unpaid principal balance. New Loan mode starts from the original balance and projects through the initial fixed period.
Monthly payment
For principal P, monthly rate r, and n payments remaining, the level principal-and-interest payment is:
Payment = P × r × (1 + r)n ÷ ((1 + r)n − 1)
At a zero interest rate, payment is principal divided by the number of payments.
Balance at the change date
The balance is projected through the scheduled payments that occur before the new rate begins. When the borrower provides a current scheduled principal-and-interest payment, that amount is used. Otherwise, a level payment is calculated from the entered balance, rate, and term.
Rate calculation
- Add the selected index and contractual margin.
- Apply the note’s stated rounding increment and tie rule.
- Apply the upward or downward limit for that adjustment.
- Apply the lifetime floor and ceiling.
- Recast payment from the projected balance and remaining term.
Rates are represented as scaled decimal integers during contract rounding and cap comparisons. This avoids binary floating-point errors at exact rate-rounding boundaries.
Reachable stress path
The stress calculation does not jump straight to the lifetime ceiling. It applies the appropriate upward cap once, calculates payment, amortizes the balance until the next adjustment, and repeats. The result describes a contractual limit path, not a prediction of future index values.
Testing and independent review
The accepted specification includes deterministic fixtures for first and periodic caps, downward adjustments, lifetime bounds, zero rates, rounding boundaries, balance projection, unsupported structures, stepwise stress paths, and equality between the two input modes.
Calculation methodology and expected results were independently reviewed before implementation. Software review tests both the accepted fixtures and adversarial cases outside them. A build is not treated as ready merely because its interface runs.
What the calculator refuses to model
Interest-only periods, payment-option structures, payment caps, negative amortization, balloon payments, and other structures that change ordinary amortization are outside this version. Presenting a standard amortizing estimate for one of those loans would be misleading, so the calculator stops instead.
What is not included
Payments exclude escrow, property taxes, homeowners insurance, mortgage insurance, HOA charges, delinquency, and fees. Calendar-date servicing rules and the final residual payment are also outside the present model.