Adjustable Rate Mortgages are mortgages where the lender adjusts the interest rate each month or at an interval agreed upon by lender and borrower. If rates go down the borrower enjoys the benefits of paying less interest plus paying more off the balance providing the payment remains the same. If rates increase the lender enjoys the benefit of more interest at the expense of the borrower. This type of loan can be be a blessing and a curse. It is a fair gesture by a lender however verifying the balance owing at any time is extremely difficult unless the borrower has the appropriate financial software, such as MORTGAGE2 PRO.

Using the **MORTGAGE2 PRO** software, changes in the nominal interest rate (Annual Interest Rate) are typed directly into the SPREADSHEET schedule. Payment #1, 12/14/2000 is the first blended payment and it is based upon the initial 12% as entered in the CALCULATOR. After the first payment was made the rate was changed to 6%. The interest due on a balance of $99,898.91 for the use of the money from 12/14/2000 to 01/14/2001 is $499.49 (.06/12 x 99,898.91).

These large changes were purposely chosen to simplify the example. For example, the interest due on 12/14/2000 is 1% of the $100,000 a nice simple shift of the decimal point. After payment #2 was made the rate was changed to 3% for the upcoming month. The 3% annual interest rate, in the SPREADSHEET, is automatically divided by 12 and multiplied by $99,297.32 for an interest charge of $248.24 on 02/14/2001. The full payment #8, is applied towards reducing the balance to $94,408.52 because the interest rate was changed to zero on line 7 the month before.