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Combination Mortgage Calculator

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Use this calculator to compare a single traditional fixed rate mortgage with combination financing. Combination financing consists of a first and second mortgage that can help you avoid Private Mortgage Insurance (PMI) payments and may lower your total monthly payment.

Combination Mortgage Calculator Definitions

Purchase price
The total purchase price of the home you are purchasing. The tool uses this amount to calculate your Loan to Equity value.
Amount to finance
This is the total amount you will need to finance to purchase your home. The tool uses this amount to calculate your Loan to Equity value. The tool assumes that the Traditional Fixed Rate mortgage will need to cover this entire amount. For the 'Combination' mortgage, your first mortgage is calculated to provide a Loan to Equity value of 80% to avoid PMI payments. Your second mortgage is calculated to cover the remaining amount financed.
Product type
These are the different financing options you may have available for your loan or loans:

Fixed Rate Mortgage
A fixed rate mortgage has the same interest rate and monthly payment throughout the term of the mortgage. The payment is calculated to payoff the mortgage balance at the end of the term. The most common terms are 15 year and 30 years.
Fully Amortizing ARM
This is the most common type of ARM. The monthly payment is calculated to payoff the entire mortgage balance at the end of the term. The term is typically 30 years. After any fixed interest rate period has passed, the interest rate and payment adjusts annually based on a margin and an index. A Fully Amortizing ARM will also have caps that control the maximum rate at each change and over the entire term of the loan. Since future rate adjustments will be based on the value of the index in the future, it is difficult to predict what rate of interest will be paid in the future. This calculator uses a maximum interest rate of 12% that you may adjust depending on your prediction of future rates.

Below is a list of the most common types of Fully Amortizing ARMs.

Common Adjustable Rate Mortgages
ARM TypeMonths Fixed
10/1 ARMFixed for 120 months, adjusts annually for the remaining term of the loan.
7/1 ARMFixed for 84 months, adjusts annually for the remaining term of the loan.
5/1 ARMFixed for 60 months, adjusts annually for the remaining term of the loan.
3/1 ARMFixed for 36 months, adjusts annually for the remaining term of the loan.
10/6 month ARMFixed for 120 months, adjusts every six months for the remaining term of the loan.
7/6 month ARMFixed for 84 months, adjusts every six months for the remaining term of the loan.
5/6 month ARMFixed for 60 months, adjusts every six months for the remaining term of the loan.
3/6 month ARMFixed for 36 months, adjusts every six months for the remaining term of the loan.
Interest Only Payments
An interest only loan only pays the interest accrued each month, the principal balance is not paid down. Interest only mortgages are typically interest only for a specified number of years and then are converted to a fully amortizing ARM for the remaining term of the loan. This creates the lowest possible payment for initially, but what can be a much higher payment when it converts to the fully amortized ARM.
Balloon Mortgage
A balloon loan is usually rather short, with a term of three to five years, but the payment is based on a term of 30 years. At the end of your loan term, you will need to pay off your outstanding balance. This usually means you must refinance your loan or convert the balloon loan to a traditional loan at the current interest rates.
Line of Credit
A line of credit allows you to borrow against the equity in your home. Typically, your required monthly payment will decrease as your balance decreases and in most cases you can access funds during the early parts of the loan by writing a check.
Interest only
Interest Only payments reduce the amount of your monthly payments because you are not reducing the balance or principal amount of your loan. Typically the period of time that your payments remain interest only is limited to only a portion of your mortgage term.
Interest only period
Number of years that your mortgage will have interest only payments. This is only used if the 'Interest Only' box has been checked. Payments on this loan will be interest only for the number of selected years and then change to a fully amortized payment, which will be considerably higher, for the remainder of the term.
Term in years
The number of years over which you will repay this mortgage. The most common mortgage terms are 15 years and 30 years.
Interest rate
Annual interest rate for each mortgage type. Typically an ARM will have a lower interest rate than a fixed rate mortgage. The rate of an Interest for the different product types will vary by lender.
PMI Percent
Cost of Principal Mortgage Insurance (PMI). For loans secured with less than 20% down, PMI is estimated as this percentage of your loan balance each year. Monthly PMI is calculated by multiplying your starting loan balance by this percent and dividing by 12. When the equity in your home exceeds the percentage required for PMI, your PMI payment drops to zero. Please note that this is only an estimate of your actual PMI. The amount you may be required to pay may be higher or lower than our estimate.
Monthly payment
Monthly principal and interest payment (PI) for the Fixed Rate Mortgage and the Fully Amortizing ARM. This is an interest only payment for an Interest Only ARM. This also includes an estimated PMI payment amount required by the mortgage lender.
Months rate initially fixed
This is the number of months the rate is fixed for an ARM. During this period the interest rate and the monthly payment will remain fixed. The rate will then adjust annually by the expected rate change.
Interest rate cap
This is the maximum interest rate for this mortgage. The mortgage's interest rate will never exceed the interest rate cap.
Months between adjustments
The number of payment periods between potential adjustments to your interest rate. The most common is 12 months, which means your payment could change at most once per year. Loans using the SOFR benchmark have six months between adjustments. The SOFR benchmark is based on what U.S. financial institutions pay each other for overnight loans. It is often used as a replacement for the LIBOR benchmark which is no longer used.
Expected adjustment
The annual adjustment you expect in your ARM. The range for this calculator is minus 3% to plus 3%. Use a negative value if you believe interest rates will decrease, a positive value if you believe they will increase.