Adjustable Rate Mortgage
An adjustable rate mortgage is a loan whose interest rate varies during the repayment term. These types of loans are most often found in the real estate market, hence their name. In this chapter, we will refer to adjustable rate mortgages as ARMs.
Sample Request
The example below starts off with a teaser rate of 4% for 12 months. After the teaser term expires, the loan quotation will move the rate towards the sum of the index + margin (10%) as constrained by the specified annual rate increase of 2% per year.
<inARM AccrualCode="320">
<!-- Loan Terms -->
<LoanDate>2024-12-01</LoanDate>
<PmtDate>2025-01-01</PmtDate>
<Proceeds>500000.00</Proceeds>
<Term>60</Term>
<!-- Basic ARM Prompts -->
<TeaserRate>4.000</TeaserRate>
<TeaserTerm>12</TeaserTerm>
<Index>6.00</Index>
<Margin>4.00</Margin>
<!-- Rate Evolution -->
<TermStep>12</TermStep>
<AnnualRateIncrease>2.00</AnnualRateIncrease>
<!-- Ceiling and Floor Rates -->
<MinRate>4.00</MinRate>
<MaxRate>12.00</MaxRate>
</inARM>
Sample Response
The following response is returned from the SCEX when provided with the sample request above.
<?xml version="1.0" standalone="no" ?>
<!DOCTYPE outARM SYSTEM "outARM.dtd">
<outARM>
<Results>
<Description>Successful Calculation</Description>
<Number_of_Groups>4</Number_of_Groups>
</Results>
<FedBox>
<AmtFin>500000.00</AmtFin>
<FinChg>85428.16</FinChg>
<TotPmts>585428.16</TotPmts>
<RegZAPR Type="Actuarial">6.270</RegZAPR>
</FedBox>
<Moneys>
<Principal>500000.00</Principal>
<Interest>85428.16</Interest>
<Protection Category="None" PerPmt="0.00" PerDay="0.00">0.00</Protection>
</Moneys>
<Accrual>
<Method>Actual/365 US Rule</Method>
<Days1Pmt DayCount="Actual">31</Days1Pmt>
<Maturity>2029-12-01</Maturity>
</Accrual>
<PmtStream Term="12" Pmt="9208.40" Rate="4.000" Begin="2025-01-01"/>
<PmtStream Term="12" Pmt="9577.98" Rate="6.000" Begin="2026-01-01"/>
<PmtStream Term="12" Pmt="9866.06" Rate="8.000" Begin="2027-01-01"/>
<PmtStream Term="24" Pmt="10066.62" Rate="10.000" Begin="2028-01-01"/>
<AmTable>
<GrandTotals PmtTot="585428.16" IntTot="85428.11" PrinTot="500000.05"/>
<SubTotals Year="2025" Start="1" Events="12" PmtSub="110500.80" IntSub="18319.66" PrinSub="92181.14"/>
<SubTotals Year="2026" Start="13" Events="12" PmtSub="114935.76" IntSub="21935.29" PrinSub="93000.47"/>
<SubTotals Year="2027" Start="25" Events="12" PmtSub="118392.72" IntSub="21685.11" PrinSub="96707.61"/>
<SubTotals Year="2028" Start="37" Events="12" PmtSub="120799.44" IntSub="17197.99" PrinSub="103601.45"/>
<SubTotals Year="2029" Start="49" Events="12" PmtSub="120799.44" IntSub="6290.06" PrinSub="114509.38"/>
<AmLine Idx="1" Date="2025-01-01" BegBal="500000.00" Pmt="9208.40" Int="1698.63" Prin="7509.77" EndBal="492490.23"/>
<AmLine Idx="2" Date="2025-02-01" BegBal="492490.23" Pmt="9208.40" Int="1673.12" Prin="7535.28" EndBal="484954.95"/>
<AmLine Idx="3" Date="2025-03-01" BegBal="484954.95" Pmt="9208.40" Int="1488.08" Prin="7720.32" EndBal="477234.63"/>
<AmLine Idx="4" Date="2025-04-01" BegBal="477234.63" Pmt="9208.40" Int="1621.29" Prin="7587.11" EndBal="469647.52"/>
<AmLine Idx="5" Date="2025-05-01" BegBal="469647.52" Pmt="9208.40" Int="1544.05" Prin="7664.35" EndBal="461983.17"/>
<AmLine Idx="6" Date="2025-06-01" BegBal="461983.17" Pmt="9208.40" Int="1569.48" Prin="7638.92" EndBal="454344.25"/>
<AmLine Idx="7" Date="2025-07-01" BegBal="454344.25" Pmt="9208.40" Int="1493.73" Prin="7714.67" EndBal="446629.58"/>
<AmLine Idx="8" Date="2025-08-01" BegBal="446629.58" Pmt="9208.40" Int="1517.32" Prin="7691.08" EndBal="438938.50"/>
<AmLine Idx="9" Date="2025-09-01" BegBal="438938.50" Pmt="9208.40" Int="1491.19" Prin="7717.21" EndBal="431221.29"/>
<AmLine Idx="10" Date="2025-10-01" BegBal="431221.29" Pmt="9208.40" Int="1417.71" Prin="7790.69" EndBal="423430.60"/>
<AmLine Idx="11" Date="2025-11-01" BegBal="423430.60" Pmt="9208.40" Int="1438.50" Prin="7769.90" EndBal="415660.70"/>
<AmLine Idx="12" Date="2025-12-01" BegBal="415660.70" Pmt="9208.40" Int="1366.56" Prin="7841.84" EndBal="407818.86"/>
<AmLine Idx="13" Date="2026-01-01" BegBal="407818.86" Pmt="9577.98" Int="2078.20" Prin="7499.78" EndBal="400319.08"/>
<AmLine Idx="14" Date="2026-02-01" BegBal="400319.08" Pmt="9577.98" Int="2039.98" Prin="7538.00" EndBal="392781.08"/>
<AmLine Idx="15" Date="2026-03-01" BegBal="392781.08" Pmt="9577.98" Int="1807.87" Prin="7770.11" EndBal="385010.97"/>
<AmLine Idx="16" Date="2026-04-01" BegBal="385010.97" Pmt="9577.98" Int="1961.97" Prin="7616.01" EndBal="377394.96"/>
<AmLine Idx="17" Date="2026-05-01" BegBal="377394.96" Pmt="9577.98" Int="1861.13" Prin="7716.85" EndBal="369678.11"/>
<AmLine Idx="18" Date="2026-06-01" BegBal="369678.11" Pmt="9577.98" Int="1883.84" Prin="7694.14" EndBal="361983.97"/>
<AmLine Idx="19" Date="2026-07-01" BegBal="361983.97" Pmt="9577.98" Int="1785.13" Prin="7792.85" EndBal="354191.12"/>
<AmLine Idx="20" Date="2026-08-01" BegBal="354191.12" Pmt="9577.98" Int="1804.92" Prin="7773.06" EndBal="346418.06"/>
<AmLine Idx="21" Date="2026-09-01" BegBal="346418.06" Pmt="9577.98" Int="1765.31" Prin="7812.67" EndBal="338605.39"/>
<AmLine Idx="22" Date="2026-10-01" BegBal="338605.39" Pmt="9577.98" Int="1669.83" Prin="7908.15" EndBal="330697.24"/>
<AmLine Idx="23" Date="2026-11-01" BegBal="330697.24" Pmt="9577.98" Int="1685.20" Prin="7892.78" EndBal="322804.46"/>
<AmLine Idx="24" Date="2026-12-01" BegBal="322804.46" Pmt="9577.98" Int="1591.91" Prin="7986.07" EndBal="314818.39"/>
<AmLine Idx="25" Date="2027-01-01" BegBal="314818.39" Pmt="9866.06" Int="2139.04" Prin="7727.02" EndBal="307091.37"/>
<AmLine Idx="26" Date="2027-02-01" BegBal="307091.37" Pmt="9866.06" Int="2086.54" Prin="7779.52" EndBal="299311.85"/>
<AmLine Idx="27" Date="2027-03-01" BegBal="299311.85" Pmt="9866.06" Int="1836.87" Prin="8029.19" EndBal="291282.66"/>
<AmLine Idx="28" Date="2027-04-01" BegBal="291282.66" Pmt="9866.06" Int="1979.13" Prin="7886.93" EndBal="283395.73"/>
<AmLine Idx="29" Date="2027-05-01" BegBal="283395.73" Pmt="9866.06" Int="1863.42" Prin="8002.64" EndBal="275393.09"/>
<AmLine Idx="30" Date="2027-06-01" BegBal="275393.09" Pmt="9866.06" Int="1871.16" Prin="7994.90" EndBal="267398.19"/>
<AmLine Idx="31" Date="2027-07-01" BegBal="267398.19" Pmt="9866.06" Int="1758.23" Prin="8107.83" EndBal="259290.36"/>
<AmLine Idx="32" Date="2027-08-01" BegBal="259290.36" Pmt="9866.06" Int="1761.75" Prin="8104.31" EndBal="251186.05"/>
<AmLine Idx="33" Date="2027-09-01" BegBal="251186.05" Pmt="9866.06" Int="1706.69" Prin="8159.37" EndBal="243026.68"/>
<AmLine Idx="34" Date="2027-10-01" BegBal="243026.68" Pmt="9866.06" Int="1597.98" Prin="8268.08" EndBal="234758.60"/>
<AmLine Idx="35" Date="2027-11-01" BegBal="234758.60" Pmt="9866.06" Int="1595.07" Prin="8270.99" EndBal="226487.61"/>
<AmLine Idx="36" Date="2027-12-01" BegBal="226487.61" Pmt="9866.06" Int="1489.23" Prin="8376.83" EndBal="218110.78"/>
<AmLine Idx="37" Date="2028-01-01" BegBal="218110.78" Pmt="10066.62" Int="1852.45" Prin="8214.17" EndBal="209896.61"/>
<AmLine Idx="38" Date="2028-02-01" BegBal="209896.61" Pmt="10066.62" Int="1782.68" Prin="8283.94" EndBal="201612.67"/>
<AmLine Idx="39" Date="2028-03-01" BegBal="201612.67" Pmt="10066.62" Int="1601.85" Prin="8464.77" EndBal="193147.90"/>
<AmLine Idx="40" Date="2028-04-01" BegBal="193147.90" Pmt="10066.62" Int="1640.43" Prin="8426.19" EndBal="184721.71"/>
<AmLine Idx="41" Date="2028-05-01" BegBal="184721.71" Pmt="10066.62" Int="1518.26" Prin="8548.36" EndBal="176173.35"/>
<AmLine Idx="42" Date="2028-06-01" BegBal="176173.35" Pmt="10066.62" Int="1496.27" Prin="8570.35" EndBal="167603.00"/>
<AmLine Idx="43" Date="2028-07-01" BegBal="167603.00" Pmt="10066.62" Int="1377.56" Prin="8689.06" EndBal="158913.94"/>
<AmLine Idx="44" Date="2028-08-01" BegBal="158913.94" Pmt="10066.62" Int="1349.68" Prin="8716.94" EndBal="150197.00"/>
<AmLine Idx="45" Date="2028-09-01" BegBal="150197.00" Pmt="10066.62" Int="1275.65" Prin="8790.97" EndBal="141406.03"/>
<AmLine Idx="46" Date="2028-10-01" BegBal="141406.03" Pmt="10066.62" Int="1162.24" Prin="8904.38" EndBal="132501.65"/>
<AmLine Idx="47" Date="2028-11-01" BegBal="132501.65" Pmt="10066.62" Int="1125.36" Prin="8941.26" EndBal="123560.39"/>
<AmLine Idx="48" Date="2028-12-01" BegBal="123560.39" Pmt="10066.62" Int="1015.56" Prin="9051.06" EndBal="114509.33"/>
<AmLine Idx="49" Date="2029-01-01" BegBal="114509.33" Pmt="10066.62" Int="972.54" Prin="9094.08" EndBal="105415.25"/>
<AmLine Idx="50" Date="2029-02-01" BegBal="105415.25" Pmt="10066.62" Int="895.31" Prin="9171.31" EndBal="96243.94"/>
<AmLine Idx="51" Date="2029-03-01" BegBal="96243.94" Pmt="10066.62" Int="738.31" Prin="9328.31" EndBal="86915.63"/>
<AmLine Idx="52" Date="2029-04-01" BegBal="86915.63" Pmt="10066.62" Int="738.19" Prin="9328.43" EndBal="77587.20"/>
<AmLine Idx="53" Date="2029-05-01" BegBal="77587.20" Pmt="10066.62" Int="637.70" Prin="9428.92" EndBal="68158.28"/>
<AmLine Idx="54" Date="2029-06-01" BegBal="68158.28" Pmt="10066.62" Int="578.88" Prin="9487.74" EndBal="58670.54"/>
<AmLine Idx="55" Date="2029-07-01" BegBal="58670.54" Pmt="10066.62" Int="482.22" Prin="9584.40" EndBal="49086.14"/>
<AmLine Idx="56" Date="2029-08-01" BegBal="49086.14" Pmt="10066.62" Int="416.90" Prin="9649.72" EndBal="39436.42"/>
<AmLine Idx="57" Date="2029-09-01" BegBal="39436.42" Pmt="10066.62" Int="334.94" Prin="9731.68" EndBal="29704.74"/>
<AmLine Idx="58" Date="2029-10-01" BegBal="29704.74" Pmt="10066.62" Int="244.15" Prin="9822.47" EndBal="19882.27"/>
<AmLine Idx="59" Date="2029-11-01" BegBal="19882.27" Pmt="10066.62" Int="168.86" Prin="9897.76" EndBal="9984.51"/>
<AmLine Idx="60" Date="2029-12-01" BegBal="9984.51" Pmt="10066.62" Int="82.06" Prin="9984.56" EndBal="-0.05"/>
</AmTable>
</outARM>