Standard Arm Example

Example 4: if the rate is fixed at 5% for 5 years, a $100,000 loan will cost approximately $535 per month. If you borrow $800,000 as we did in Example 3 (and in our Overview of a Condo Purchase), the total monthly payment would be 8 x $535 = $4280 per month. That is a $520 a month savings ($4800 vs. $4280) relative to the 30-year loan in the same amount. And, remember, with a typical standard ARM, a portion of each month’s payment is applied toward the loan’s principle balance.

In this example, your payments are fixed at $4280 for 5 years. After 5 years, the interest rate and payments will adjust up or down based on loan caps and the index value at the time.

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