Mortgage question
 

Lets say you have an adjustable rate mortgage and the adjustment occurs at 10 years (original loan term=30). I know the new payment is calculated based on the loan balance at 10 years, but is the payment recalculated on 30 years or 20?

thanks
Fred Emmerich

The answer depends on the terms of the mortgage.

Most adjustable rate mortgages adjust the interest rate and the payment amount at specific intervals to ensure that the entire principal balance is paid off at the specified term (usually 15 or 30 years).

In your situation, the bank will adjust the loan at 10 years with a new interest rate and calculate the payment based on another 20 years of amortization of the principal.

There are mortgages that do not necessarily amortize in the stated term and the borrower can owe a "balloon" payment to satisfy the mortgage at the end of the term. They are not common, however.

Ask your lender to provide you with a new amortization schedule. It would show how much of your monthly payment is dedicated towards principal paydown and indicate how much principal, if any, remains unpaid at loan maturity. Any amount greater than zero is the balloon.

thanks guys, I think 20 is the answer.

Everything is negotiable. Ask them for what you want.