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About the ARM Rate/Point Calculator

November 1, 1999

The rate/point break-even decision on ARMs is essentially the same as it is on FRMs, but as usual with ARMs, more information must be entered by the user. However, the user is not asked to make assumptions about future interest rates. The break-even period on ARMs is calculated on no-change scenarios, that is, on the assumption that the rate index does not change. We did it this way because, after careful study, we realized that changing the future interest rate scenario did not affect the break-even period because it impacted the high-rate/low-point and the low-rate/high-point mortgages equally.

Copyright Jack Guttentag 2002