Taking out a mortgage, if not scary, can certainly be nerve-wracking. The Mortgage Center @ Financial-Calculators.com is here to provide you with background information to help you through the process.
The Pew Research Center says, "A home is one of the most commonly owned assets, and home equity is the single largest contributor to household wealth."
If you are on the fence about buying, here is the information that will help you make an informed decision.
Together, we'll cover:
- The key to comparing mortgages — the annual percentage rate (APR)
- The tax benefits (Maybe) of having a mortgage.
- Is buying a house a good investment?
- Why making extra payments saves you money.
- Two practical tips for saving money.
- What about adjustable-rate mortgages (ARM)?
- Your Comments or Questions.
First, What is a Mortgage?
A mortgage is a loan secured by real estate.
What does that mean?
Very broadly speaking, there are two types of lending.
- A lender will lend money to you based on your reputation for paying back loans (or because they love you). For example, a credit card company will lend to you based on your credit history. If you fail to pay, the lender does not have the right to seize assets. If the lender cannot repossess assets, it is known as unsecured lending.
- The second type of lending involves loans that are backed by an asset. That is, if the debtor fails to pay as promised, the lender can seize the asset (or assets) that the loan document specifies. Such a loan is called a secured loan. A mortgage is a secured loan because the mortgage holder can take the real estate if the borrower defaults, that is, they fail to pay.
There's more to know about a mortgage than the payment amount.
The Annual Percentage Rate — APR
You should use the APR to compare mortgage offers.
In the US, the APR is one of the few numbers when it comes to lending, which is regulated by the Federal Government (see Truth-in-Lending Act TILA). Some people may think that the government would regulate payment amounts. But that is not the case. A lender may usually stipulate any payment amount they wish, and that's fine if the borrower agrees to it.
But the APR is different. The APR is not an interest rate. The APR is a rate-of-return, and the TILA clearly states how to calculate it (but not maximums or minimums values). The Consumer Financial Protection Bureau (previously the US Fed) is responsible for oversight under the TILA.
The APR is a good thing for the consumer. Since the TILA was passed in 1968, forcing the adoption of a consistent APR calculation, it has become easier for borrowers to compare different loan offers on equal a footing. Before lenders had to disclose the APR, the borrower was left comparing mortgage interest rates or payment amounts, and then they had to factor in various fees.
The borrower had to decide, was a 5% mortgage interest rate and $2,000 in various closing costs and fees better than a 5.125% mortgage with lower closing costs?
Who knew? You had to either do the math by hand or risk selecting the higher-cost loan.
But lenders now have to be compliant with the TILA. Which means they have to calculate it the same way. (The Act goes on for pages!).
As useful as the APR is for comparing loans, there is a rub. The APR is a personal number. That is, the consumer cannot reliably compare lenders by comparing advertised APRs. The advertised APRs are just starting points.
For one thing, the payment amount quoted will impact a loan's APR. But it's just not the payment amount, fees, and other charges that also affect the APR calculation. Required inspection reports, attorney's fees, and loan application fees all determine your APR. And to the extent, those fees will vary from lender to lender, the APR will also change.
Since you can't use advertised APRs, to compare loans effectively, you must either have each potential lender prepare what is known as an APR Disclosure Statement or, to expedite things, you can use a calculator that calculates the APR for a DIY comparison.
So how do you calculate an APR?
The Accurate Mortgage Calculator will do the heavy lifting and calculate the APR for you. But you still need to understand what factors into the calculation. For the calculator to calculate an accurate APR, you'll need to provide the following information:
- loan amount
- payment amount (either enter the lender's quoted payment or calculate it)
- the other loan details - amount, term and interest rate
- points, if any
- total of all fees and charges REQUIRED by the lender
- PMI rate, if required
There's another caveat the borrower should be aware of when comparing APRs. You do not necessarily want to take the loan with the lowest APR.
Why's that? When given a choice, why would I ever want to take out a loan with a higher APR?
Remember I said the APR is a "personal number?" If you are taking out a 30-year mortgage, the mathematics behind the APR assumes that you'll be paying off the loan for the entire 30 years. And the same for a 15-year mortgage. Or for any loan term.
But your circumstances will likely vary. For example, if you plan to sell the property before the loan's term is reached, then the calculated APR is not the actual APR. This is because you pay the fees and other charges up-front and over the shorter term, their impact on the APR is more significant.
Therefore, the higher the fees, and the shorter the term, the higher the APR. So if you are considering paying points to reduce your interest rate and you see that doing so lowers the APR, below another lender's offer, that may only be the case if you stay in the home and pay the mortgage for its fully stated term. If not, the loan with the higher APR but lower fees may be the better deal.
Are There Tax Benefits to Having a Mortgage?
In the US, Uncle Sam helps homeowners by giving them a tax break on primary residences. The UMC shows the benefit in dollar terms (amount saved on taxes) on the amortization schedule if you provide your marginal tax rate.
Calculating the benefits use to be straight forward until The Tax Cuts and Jobs Act (TCJA) [as explained by the TaxFoundation.org] became law in 2017. It's not anymore. And accordingly, it is possible that the calculator OVERSTATES the tax benefit to you. That will be the case if either of these is true:
- If you do not itemize deductions on your tax return, then there is no tax benefit to having a mortgage. Do not enter a marginal tax rate. (The tax law change increased the standard deduction as of tax-year 2018, and the IRS expects fewer people to itemize their return.)
- As of 2018, there are caps on the mortgage interest deduction and property tax deduction. So if you see that either of the costs exceeds the caps, then your tax benefit is being overstated. (That is, the calculator does not know about the caps, mainly because it would also need to know your state income tax liability if there is any.
For those interested, here are the caps, per Bill Bischoff, writing at MarketWatch:
- "the TCJA changes the deal by limiting itemized deductions for personal state and local property taxes and personal state and local income taxes (or sales taxes if you choose that option) to a combined total of only $10,000 ($5,000 if you use married filing separate status)."
- "For 2018-2025, the TCJA generally allows you to deduct interest on up to $750,000 of mortgage debt incurred to buy or improve a first or second residence (so-called home acquisition debt)"
- For those who use married filing separate status, the home acquisition debt limit is $375,000.
I've left the tax benefit calculation option for those that will benefit from Uncle Sam's generosity and understand the above.
Is Buying a House a Good Investment?
In general, yes, I think it is.
Take a look at the gain in home prices over various periods for the past 66 years as measured by the Case-Shiller Home Price Index (CSHPI).
|Case-Shiller Nominal Home Price Index - Not Seasonally Adjusted|
If you are looking at these gains and saying to yourself, well, it's obvious that buying a home is a good investment, and if necessary, taking out a mortgage is the thing to do. If you think that, then I have to say hold on a minute. Home appreciation is only one of the considerations. We need to look at several other things as well before we can answer the question.
Here is where we need to briefly pause to explain how we are going to know if a mortgage a good investment. That is, what number will tell us this?
If you understand what ROI is, then feel free to skip to How Do I Calculate the ROI?
The Key Number to Understand: ROI
The key is to understand what a return-on-investment calculation is and how it's useful. Return-on-Investment (or ROI), sometimes also called rate-of-return (ROR) or internal rate of return (IRR), tells us what the gain (or loss) is on an investment expressed as an annualized percentage.
If you invest $1,000 and sell the investment a year later for $1,500, your ROI is 50%.
The keyword in the definition is "annualized." Using the same example as above, but this time, you sell the investment after two years, the gain is still 50%, but the annualized return will no longer be 50% because it took two years to make the $500 profit. (The ROI will be approximately 22% - See ROI Calculator.)
Further, if you invest $1,000 and sell $750 one year later and sell a final $750 at the end of the second year, the total gross return is still 50%, but the ROI will be higher. (It will be nearly 32% - see the IRR Calculator).
This result is because you received a return on your investment before the end of the 2-year term. And the investment return earlier in the cash flow improves the ROI - a bird-in-hand as such.
The point is the ROI levels the playing field. In the above example, we always have a $500 profit for a 50% gross return. If you were to only look at the gain, you might think there's no difference in the investment. But that's not the case, and the ROI tells us that.
The ROI also gives you the tool to compare 15-year mortgages with 30-year mortgages, or any term you like for that matter.
For the above reason, the UMC calculates an ROI so you can answer if a house is a good investment for you. Generally speaking, if the ROI is negative, you should perhaps consider renting as an alternative to purchasing a home. On the other hand, if it's positive, then the projection is, you'll earn a profit on the purchase.
How Do I Calculate the ROI?
This mortgage finance calculator, of course, does the math. We need to make a few decisions, however.
- First, expenses, of course, impact the profitability of an investment. Housing is no different. We need to decide what costs we want to include in the calculation? Are we only concern with the direct mortgage expenses, such as down payment, periodic payments, points, etcetera? Or do we want a broader analysis that includes estimated maintenance, insurance, and property taxes?
- Secondly, do we want an inflation-adjusted analysis? Over the term of a 15-year or 30-year mortgage, inflation can have quite an impact. Or do we want an unadjusted ROI?
The UMC is very flexible, and it allows users to answer these questions in a way that meets their needs. However, reasonable defaults are preloaded into the calculator when you first land on this page (I go into detail how I selected each default below), and we'll use those for this analysis.
For our illustration, we are going to use the CSHPI to estimate the future selling price of the home. Since we use a 30-year mortgage to base our example on, we'll assume our house will increase in values at a rate of 4% per year.
For general cost inflation (maintenance, property taxes, etc.), the UMC allows you to enter a different inflation number. Per the Federal Reserve Bank of St. Louis, "...the FOMC [Federal Open Market Committee] adopted an explicit inflation target of 2 percent in January 2012." While inflation has been running a bit under that, we'll use 2% for this example's cost inflator.
Now, as to the costs, let's look at where I got the numbers used in this example. (I suggest you refresh the page to reload the calculator with the numbers we are using. After you understand the analysis, you can get your numbers together. Then the results will be more meaningful to you.)
- Loan Amount: According to the Consumer Financial Protection Bureau, the average size new mortgage balance as of 2017 was $260,386. (Assuming a 20% cash down payment, the calculator will calculate the Price of Real Estate.
- Annual Interest Rate: As of February 2019, the average interest rate for a 30-year fixed mortgage was 4.35%, per Freddie Mac as retrieved from FRED, Federal Reserve Bank of St. Louis; March 2, 2019.
You'll find the following inputs on the Options tab:
- Annual Property Taxes: Property taxes in most states contribute a significant amount to the overall cost of owning a home, and the UMC accounts for them. I calculated the average property tax rate of 0.98 from the Median Property Tax Rates By State data found at tax-rates.org. Using 0.98% on the average selling price, we get an average property tax bill of $3,190.00. (Of course, if you don't know the actual property tax yet, you can find your state's rate here.)
There are two additional expenses, and for these numbers, I'm winging it:
- Annual Maintenance $3,000
- Yearly Property and Casualty Insurance premium $800.
One expense the calculator does not directly support is homeowners association fees (HOA fee). If you need to account for those, calculate the current annual amount and add that amount to the yearly maintenance expense. The ROI calculation will be correct.
Given the above details, what's the ROI?
Hmm, that's not so good. True, it's probably better than the annual return you would have earned from a savings account for the past ten years, but you must be wondering why I say, in general, buying a house is a good investment?
That's because this analysis is not complete — 1.6% is just an intermediate result. After all, you have to live somewhere, right?
Buy vs. Rent
If your alternative to buying is renting, then your estimated rent needs to be an offsetting cost in your calculation.
What do I mean? Why is this?
Look at it this way, what's your ROI on rent? Nothing, of course. In fact, it is worse than nothing. The money is out the door, never to be seen again. Therefore, you should say the ROI is -100%. But that's silly. No one thinks of ROI when it comes to renting.
So to make the comparison between renting and buying meaningful, we need to zero out the 100% rent loss. To do this, the UMC will adjust the total cost of homeownership by what you are willing to spend on rent (the analysis looks at rent or cost-of-housing as a fixed cost). If you are ready to pay $20,000 a year for rent, then the calculator's analysis will look at the difference in costs and calculate the ROI.
In other words, the UMC will calculate an ROI for the marginal dollars you'll spend owning a home over renting. You should do this because it's only the dollars after the cost-of-housing that you'll have available to invest if you decide homeownership is not for you.
Alright, so how will considering rent in the analysis impact the results?
Well, let's see.
According to RENTCafe.com, the average rent in the US as of June 2018 for three bedrooms is $1,714 a month. If we enter that into Monthly Rent and recalculate, the ROI is now:
Quite a difference, wouldn't you say! And also, I think, a more realistic result. Because it's telling us that if we take out an average mortgage at a nationwide average interest rate and pay average costs, we'll make a return on our INVESTABLE dollars of 10.1%.
A 10.1% return is better than the S&P has done over the last 30 years, which was 5.9% without accounting for dividend reinvestment.
Still not sure about buying?
Then take a look at this pie chart the calculator creates:
Regardless of what ROI you earn, when the 30 years are over, if the projections hold up, and after you have paid all the mortgage payments along with the taxes, insurance, and maintenance, you'll have an asset that you can sell for approximately $1,055,000.
How much of the rent money will you get back?
Not only do you get back the investment gain on your marginal dollars spent, but you also recover your housing costs from the past 30 years!
Plus, there are at least two other financial benefits to buying a house that doesn't show up in the totals:
- Taking out a 15-year or 30-year fixed-rate mortgage locks you into a fixed payment amount for a very significant portion of your housing cost. You can't say that about renting.
- And once you've paid off the mortgage, your housing costs going forward will drop significantly. Of course, that will never happen if you decide to continue renting.
A few words of caution.
- All real estate is local. Some areas tend to appreciate well above the national average, and some will, of course, fall below the average. It is up to you to buy right and to make the right assumptions.
- The results of this analysis could quickly change if interest rates rise. Interest is a significant cost component of the mortgage. Make sure you do your own analysis.
- The results will also change (perhaps significantly) if you do not stay in the house for the full term of the mortgage. Want to see by how much the ROI will change? First, prepare a full term analysis of your mortgage, and then do it again by changing the "Number of Payments" to the length of time you expect to own the home. That is, if you are going to be in the house for eight years, change the "Number of Payments" to 96 and leave everything else the same. Then recalculate the ROI using the shorter term.
Finally, the point is not to agree or disagree with the numbers I'm using. The point is to give you a tool and the background so that you can do your own analysis. The Accurate Mortgage Calculator is flexible enough that you should be able to study the home buying transaction any way that makes you comfortable to answer the question, "is buying a house a good investment?"
Ok, I'm leaning toward buying a home. Is there any way I can save some money and improve the ROI even more?
Yes, there is.
You might want to consider making extra payments to reduce interest charges or the mortgage saving tips that follow.
Why Making Extra Payments Saves You Money
I assume that most borrowers know that if they pay an additional amount on their mortgage (or any loan) above the required payment that they'll save money. (Check the terms of your loan to make sure there is no prepayment penalty.)
How does paying extra on your mortgage work? That is, why does it save you money? (see: mortgage calculator with extra payments.)
The answer is rather simple. When you make a payment on a traditional mortgage, the interest gets calculated using the current balance for the number of days since the last payment. The calculation adds the interest to the loan balance and then deducts the total payment amount.
If you pay an additional $200, for example, 100% of the $200 is used to reduce the principal balance (or at least it should be if the lender's math is correct). Then next time, interest is calculated on the balance that is lower by $200 than it would otherwise be.
And the lower the balance, the lower the calculated interest.
The crucial thing to understand is, while an extra $200 may not seem like much in terms of say a $250,000 balance, but that single $200, has reduced the balance of the loan from its payment date until the loan is paid-in-full. The interest saving is on every future payment. And if you continue to make the extra payment, their impact is compounded.
You'll be able to save quite a bit of money! And that has got to be a good thing, right?
Well, let's see how good.
What is the effect of paying extra principal on a mortgage?
Assume you receive a year-end bonus, and you are considering making a single lump-sum payment toward the mortgage balance of $10,000. What will be the interest savings?
If you assume this calculator's default values, the one-time $10,000 additional payment will save you more than $23,000 in future interest charges.
Is it a good idea to make extra mortgage payments?
There's an ongoing debate among financial professionals and even mortgage holders at large whether or not it's a good idea to prepay a mortgage. The thinking is, you could use the money that you are using to make additional loan payments and invest the money instead. Some say, investing the funds will create more wealth than it saves in interest charges.
I'm not here to give financial advice, and the Accurate Mortgage Calculator can't help you with an answer. What it will do is calculate the interest you'll save if you choose to make extra payments.
What it will do that this calculator won't do is prepare a comparative financial schedule that calculates both what the interest savings will be as well as the projected future value if you invested the money instead.
You definitely should look at this calculator if you are making or planning to make extra principal payments.
What if you're not convinced that you should make additional mortgage payments. Are there any other techniques you can use to reduce your costs?
Yes, there are.
Two Practical Tips for Saving Money on a Mortgage
Mortgage payments are generally a significant portion of any family's monthly budget. Typically the mortgage loan consumes 25% or more of the monthly income. Hopefully, most consumers know if they make extra payments or agree to bi-weekly payments, they can save a small boatload of interest over the term of their loan. These strategies are certainly useful, and they will save you money. You should consider them depending on your other investment options.
But what if you don't have the free cash flow to make extra payments? Are there money-saving strategies that don't require sacrifice?
Well, yes, in fact, there are. Read on for two such ideas for you. Naturally, you'll want to plug your numbers into the calculator to see what you can save.
TIP 1: Don't Assume Making a Higher Down Payment Saves Money
Usually, one would think that the greater the down payment amount, the less the amount borrowed. The lower loan amount means a lower accumulated interest charge over the term of the loan. That's what one would think, and usually, that would be correct. But at least in the US, mortgage borrowers have another option.
Borrowers can pay points. Points are nothing more than an up-front fee charged by lenders in exchange for a lower interest rate. The lender will calculate the amount owed for points as a percentage of the total loan. On a $300,000 loan, 2.5 points equals $7,500.
So you're thinking, I understand what points are. And I do plan to be in this house for a dozen years or more. It also sounds good to pay something upfront in exchange for a lower interest rate, but what if I don't have the available cash to pay points? Am I out of luck?
You can swap down payment for points.
How much cash do you have for a down payment? Twenty percent or more?
If that's the case, it may save you money if you give the lender less for a down payment and use that money to pay a couple of points. Let's look at an example.
In the calculator, enter the following values:
- Price of Real Estate or Asset?: $375,000.00
- Down Payment Percent?: 22%
- Loan Amount?: $0
- Number of Payments? (#): 360
- Annual Interest Rate?: 4.1250%
- Payment Amount?: $0
- Points?: 0
Since we are comparing mortgage strategies only, make sure "Annual Property Taxes," "Annual Insurance," and "Private Mortgage Ins. (PMI)" are all set to "0". (mortgage calculator with PMI)
The calculator is going to calculate both the mortgage loan amount and the monthly payment since you have entered zeros for those inputs.
The significant number, however, is total interest. Checking at the bottom of the calculator, just above the buttons, you'll see for our example loan that you would pay $217,836 in interest over the term of the loan. Make a note of this number. You'll need it for the next step.
There is one more calculation. Change the following inputs (the others are left as they are):
- Down Payment Percent?: 20%
- Mortgage Amount?: $0 (Reset for new calculation)
- Annual Interest Rate?: 3.8750%
- Payment Amount?: $0 (Reset for new calculation)
- Points?: 2.00 (Under the "Options" tab.)
What we have done is to reduce the down payment amount by 2% and added 2 points. When you add points, you are buying a lower interest rate. In this (conservative) example, adding 2 points lowers the fixed interest rate by 1/4 of a percent over the entire term of the loan. You may find in your area that you can reduce your rate more -- maybe by 0.333% or even 0.4%.
We are now ready to calculate the new mortgage details. This time, since there are more details on the schedule, click "Pmt & Cost Schedule" (It is not necessary to click "Calc" first.)
There are two totals in the summary section of the schedule we need to know:
- Points Amount: $6,000
- Total Interest & Points Paid: $213,856
Compare this to the total interest from the first calculation when the down payment was higher, and there were no points — $217,836.
The mortgage with the two points and 20% down will save you $3,970 over the one with 22% down.
Not only will you save nearly $4,000, but there's also icing on the cake (and it's calorie-free!). The savings come to you without you having to make any sacrifices.
- You do not have to go through anything other than the typical mortgage approval process.
- You do not have to submit a different application or do additional paperwork.
- And you do not have to have any extra money upfront.
The cool part is, if you look at your payment amount, you see it will decrease from $1417 to $1410! Woopie!
There's even more.
If you are in the US and you itemize deductions when you pay income taxes, points are often a deductible cost for obtaining a mortgage. This deduction means Uncle Sam (and other American taxpayers) is helping you out by lowering your tax bill. If you are in the 33% marginal tax bracket, $4,000 paid as mortgage points could save you $1,320 in taxes in the year you file after taking out the mortgage. (Please see the section on this page "Tax Impact" to understand the possible limits.)
This savings is a win, win, win, win.
- Lower total mortgage cost
- Lower monthly payments
- No change to the mortgage process itself
- And a front-loaded possible tax deduction
A word of caution is in order here. You'll only want to employ the second strategy if you plan to stay in your home for a relatively extended period. If you expect to move in say 5 or even ten years, you may not save enough in interest charges to make up for the points. Use the payment schedule to find your break-even point.
I should also note one point that some may consider to be a disadvantage. You'll have slightly less equity in your home in the early years of the mortgage. The reduced equity is because you've traded points in place of making a more significant down payment.
Let me know in the comments what you think of this tip. Will you consider using it?
I think my next tip is even better...
TIP 2: Make Payments at "Start-of-Period" to Save
Lenders hate this. (Hint, it has to do with their ROI.)
But if you are the borrower, you should love it.
When applying for a mortgage, lenders ask for a lot of documentation. Bank statements are one item you'll be requested to provide. They will be looking at your cash flow to see if you have two or even more payments available beyond the down payment amount you have agreed to in the purchase contract.
All well and good.
Since the lender wants you to have a payment or two already in the bank, give it to them as early as possible. Often, the initial loan installment is not due until the first-of-the-month after the month following the closing. (Close on March 20th, and the payment is due on May 1st.) Instead of waiting, hand the lender a check for the first payment on the day you sign the mortgage papers.
Why would I want to do that?
In the calculator, enter the following values:
- Price of Real Estate or Asset?: $350,000.00
- Down Payment Percent?: 20%
- Mortgage Amount?: 0
- Number of Payments? (#): 360
- Annual Interest Rate?: 4.1250%
- Payment Amount?: $1,417.60
- Points?: 0.00%
- Payment Frequency?: Monthly
- Set the Loan Date and First Payment Due, so they are one month apart
- Once again, since we are comparing only mortgage strategies, enter "0" for "Annual Property Taxes," "Annual Insurance," and "Private Mortgage Ins. (PMI)".
The calculator will solve for both the mortgage loan amount and the monthly payment since you've entered zeros for those inputs.
Click "Payment & Cost Schedules"
Make a note. Total interest due is $208,527, and the first payment is paid one month after the loan date. We call this an "end-of-period" schedule.
Now for the comparison calculation.
Change the following inputs (the others are left as they are):
- Mortgage Amount?: $0 (Reset for new calculation)
- Number of Payments? (#): 0 (Reset for new calculation)
- Set the Loan Date and First Payment Due to the same date
These changes set the calculator to calculate the loan term.
Again, click "Payment & Cost Schedules."
Notice how the first payment now falls on the closing date of the loan? Also, notice for the first installment, there is NO INTEREST DUE. Why? Because no days have passed! Interest is charged/collected only for days when the money is on loan.
Now total interest due is $205,236.
How much interest will you save?
By making this one simple change to the payment schedule, you will save $3,291 in interest charges over the term of the loan. Furthermore, you'll have to make only 258 payments, not 360, and the last payment will be due on February 1, 2047, not May 1, 2047.
Like the first tip, this tip does not require you to make any fundamental change to what you were already planning to do. You don't even have to tell your lender that you are going to do this. Just hand them the check on the day you close the loan.
If you decide to use this money-saving strategy, understand the payment you provide your lender at closing is only the mortgage payment. You do not have to give them any escrow amount they might be collecting with later payments. Escrow is something separate. An escrow amount typically is added to the regular mortgage payment, and it is used to cover property taxes and insurance. Again, you pay them only the mortgage part of your total amount at the closing.
Also, it is a good idea to closely monitor your new mortgage account and confirm that this first payment is applied 100% to the principal. If it's not, then you won't get the full benefit of this technique.
What About Adjustable Rate Mortgages or ARMs?
In the US, at least, adjustable-rate mortgages (ARM) have fallen out of favor with borrowers. In the current low-interest-rate environment, it does not make much sense for someone to take out a mortgage that has an interest rate that is more likely to increase than decrease.
The UMC does not officially support ARMs.
However, if you need to create an amortization schedule for an ARM, I'm not going to leave you high and dry. Please see the Adjustable Rate Mortgage calculator. It is easily capable of creating an amortization schedule with adjustable rates. You can adjust the interest rate as of any date, not just on payment due dates. There is even an adjustable-rate mortgage tutorial that will show you step-by-step how to create an ARM schedule.
There can be a lot of details when it comes to mortgages. But they do not have to be complicated.