Written on: September 24th, 2023
In our Finance: ARMageddon piece (1), we detailed how rising variable loan interest rates threaten homeowners around the world. We have created version 1.0 of an ARM interest calculator available for download. You enter 5 pieces of information, and the calculator compares your original loan against the new loan with higher interest rates, higher payments, and longer term. A simple chart tells you what the impact of higher interest rates will be on your total interest payments. An enhanced version is in the works. That will allow you to add variable extra monthly payments, and compare that with your original terms.
Here’s the calculator link. You’ll need Google Sheets to open it. We recommend opening a version first to see if that meets your needs. If you want to make changes to it, feel free to download and scan with an antivirus software.
https://docs.google.com/spreadsheets/d/17hdP0GZ0IGRTqvDGycW95yRNAvn_IbClb-tRzA2GkRs/ ARM Interest Template v1.0
Based on the above, the increase in interest rates will add $334,000 in interest to our current loan and increase monthly payments by almost $700 a month for the remainder of the term. That’s a big increase coming up. For most, such a move would be unaffordable. What’s the use of home equity if you can’t afford your house? Don’t let deep pocketed firms steal away your hard work and your house.
We may consider a 15 year fixed loan as we get closer to the ARM explosion date. Do whatever you can to boost your credit score, increase savings, and reduce your debt to income ratio before you refinance.
You can use the calculator for any variable rate debt, such as student loans, personal loans, credit cards, auto loans and variable mortgage loans. The only thing you need is when the loan increases the rate and what the new rate would be.
Side note: COVID, a major Russia invasion, and supply chain impacts have led the Federal Reserve to rapidly increase interest rates to tame inflation. The Fed’s approach is akin to using a jackhammer when a sleek surgical knife is needed. Collateral damage will occur in expected and unexpected spots. Our prediction is we will see increasing financial stress heading into 2025 to 2027. That’s dangerous in 2028, as authoritarians crave chaos and a return to “better” times. Exploitation capitalism needs increasing exponential growth to survive. When the limit of the people paying the debt is reached, we have a financial crisis like clockwork.
Notes:
(1) smilingdad Finance: ARMageddon http://smilingdad.blog/2023/09/05/finance-armageddon/
(2) Google Sheets ARM interest template v1.0 https://docs.google.com/spreadsheets/d/17hdP0GZ0IGRTqvDGycW95yRNAvn_IbClb-tRzA2GkRs
smilingdad 