During the Adjustable Rate Term
Requirements
The BorrowerBorrowerPerson who is the obligor per the Note. must make payments of P&IP&IPrincipal and interest based on changes to the IndexIndexBasis for determining the Gross Note Rate of an ARM Loan, including any required alternative index that may be determined necessary by Fannie Mae because the Index is no longer widely accepted or has been replaced as the index for similar financial instruments. :
- on the 1st day of the month immediately following the Hybrid ARM Conversion DateHybrid ARM Conversion DateDate when the UPB of a Hybrid ARM Loan automatically converts from accruing at a fixed interest rate to accruing at an adjustable interest rate. ; and
- on the 1st day of each month thereafter, until the Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. .
On the Rate Change Date, a new P&IP&IPrincipal and interest installment will be calculated to be in effect on the 1st day of the following month.
Monthly installments of P&IP&IPrincipal and interest , due on each payment date during the adjustable rate term, must equal the amount needed to repay the UPBUPBUnpaid Principal Balance
- in substantially equal payments over the amortization term at the variable rate,
- based on a 30/360 interest accrual method.
To determine the amount of each monthly installment allocated to principal, subtract the amount allocated to interest following each rate change.
For example:
|
A 5-year Hybrid ARM Loan with the following terms: |
|
|---|---|
|
Loan Amount |
$2,500,000 |
|
Fixed Rate |
5.25% |
|
Fixed Rate Term |
60 months |
|
Amortization Term |
360 months |
|
Fixed Rate Period |
Standard fixed payment amortization |
|
Monthly Payment |
$13,805.09 |
|
UPB at End of Month 60 |
$2,303,737.20 |
|
Upon conversion to adjustable rate in month 61, amortization is recalculated using the following terms: |
|
|---|---|
|
Loan Amount |
$2,303,737.20 |
|
Variable Rate |
4.25% |
|
Amortization Term |
300 months |
|
Monthly Payment |
$12,480.22 |
|
Interest Payment |
(4.25% / 360 months) x 30 days x UPBUPBUnpaid Principal Balance |
|
Principal Payment |
Monthly Payment – Interest Payment |
|
UPB at End of Month 66 |
$2,277,579.64 |
|
At rate change in month 67, amortization is recalculated using the following terms: |
|
|---|---|
|
Loan Amount |
$2,277,579.64 |
|
Variable Rate |
4.50% |
|
Amortization Term |
294 months |
|
Monthly Payment |
$12,799.71 |
|
Interest Payment |
(4.50% / 360 months) x 30 days x UPBUPBUnpaid Principal Balance |
|
Principal Payment |
Monthly Payment – Interest Payment |
|
UPB at End of Month 72 |
$2,251,786.15 |