I haven't touched TRID in quite some time, but now I'm back in it, and our bank now originates ARMs whereas it previously did not. So I'm looking at the projected payments table for a 10/1 ARM for the first time, and I'm confused.

This is a $356,000 loan at 3.9% for the first ten years. The rate can increase or decrease no more than 1% each year with a cap of 5% above the initial rate. The index is US Treasury 1 Year, and the margin is 2.5%. The rate floor matches the margin, 2.5%.

I know the P&I payments for the first ten years, but I'm thinking year 11 should be $1,482 min, $1,889 max (based on a minimum 2.9% interest rate and a maximum 4.9% interest rate). I know the rate is based on whatever the index will be at year 11 plus the 2.5% margin, but I don't know how to estimate that, so this approach made sense in my head.

I believe I'm wrong because I can't agree with the loan system's number. The loan system is producing $1,536 min and $1,829 max.

Anyone know where I'm going wrong? Thanks so much!

You don't tell us the overall term of the loan, but you are correct in that Year 11 should be based on a minimum interest rate of 2.9% and a maximum of 4.9%. I did not run amortizations to know what the payments would actually be.

Assuming this is a 30 year mortgage.

I got $1536 for year 11 minimum and $1829 for year 11 maximum.

I couldn't figure out where you went wrong but here are some mistakes I make when validating projected payment tables for ARM loans.

Make sure you are using the ending balance at the end of year 10 when calculating year 11 with the new rate.

Make sure you reduce your loan period to 20 years for year 11.

I figured out where I went wrong, and came here to post it, but was glad to find that two lovely people found it ahead of me, so thank you!

I was thoughtlessly entering the minimum rate of 2.9% and the maximum rate of 4.9% into the amortization schedule without also changing the principal balance and the remaining loan term.

Lesson learned!