How to Calculate a VA Hybrid ARM Adjustable Mortgage

By DB Jenkins

The Veterans Affairs (VA) department is the government's administration for active and former members of the armed forces. In addition to providing health benefits and military pensions, the VA also provides advantageous financial assistance in the form of mortgage loans. VA Hybrid adjustable rate mortgage loans are one type of these loans. Calculating these loans is fairly simple.

Collect your mortgage paperwork. This should be in a large packet. These are the documents you signed when you closed your VA Hybrid ARM loan. Look for the following documents: Mortgage Note and Adjustable Rate Note. You'll need these documents to calculate your loan.

Look at the way in which your hybrid loan is structured. Most VA Hybrid loans offer fixed rates for a period of time -- usually between one and five years. After this period, the loan rate can adjust periodically -- usually annually. This relationship between fixed and adjustable is often represented as a ratio between numbers (e.g. 5/1). A "5/1" hybrid ARM will offer a fixed interest rate for five years, then adjust one every year for the life of the loan.

Look for the margin and the index on your ARM loan. These two rates must be added together to determine your mortgage rate. The margin is a fixed rate and will be clearly displayed on your mortgage note. An index is a fluctuating rate. Common indexes include the Prime Rate and the London InterBank Offered Rate, or LIBOR. See the Resources section for a list of updated indexes.

Look up the current value of your index rate. Add this number together with your margin. So long as you are in the adjustment period on your VA ARM loan, this will be your mortgage rate.

Use the following formula to manually calculate a mortgage payment: Payment = P x [ J / 1 - (1 + J) ^ -N ]. Use the following variables: P = principal balance; J = interest in decimal form (interest rate divided by 12 times 100); N = term in months; and ^ = exponent. For example, if you wanted to calculate the payment on a $100,000 mortgage with a 30-year term and a 6 percent interest rate, the formula would look like this: Payment = 100,000 x [ .005 / 1 - (1 + .005) ^ -360]. Perform the calculation -- raising to such a high exponent is best calculated online. The payment for this mortgage is $599.55.

Confirm the accuracy of your calculations with a mortgage calculator. See Resources for a mortgage calculator. Enter the mortgage rate you calculated, the term of the loan (length, in years or months) and the balance on the mortgage. Click "calculate." Your new mortgage payment will be displayed.

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