Existing adjustable rate mortgages in RightCapital can be added in the Net Worth section of the Profile (or the Net Worth step of the initial data entry process), by clicking Add Account > Loan:
ARM Data Entry
After adding the loan, you will first want to change the Loan Type selection to 'Adjustable Rate Mortgage'. This option allows you to reflect two different interest rates over the duration of the loan.
You can then specify the Initial rate that will be applied for the duration of the Initial period (in years) that you enter. Once the initial period has passed, the Interest rate that you enter will be applied for the remainder of the Loan term.
For example...
If a 30-year adjustable rate mortgage is locked in at 4% for 10 years, then adjusts thereafter:
Input an initial period of 10 years, with an initial rate of 4%
Enter a different interest rate that would apply for the remaining 20 years.
To ensure accurate payment amounts each year, you will also need to specify the Original amount of the ARM, as well as the Origination year. Be sure to also specify the current Balance of the ARM.
Unlike regular mortgage entries, ARMs do not ask for a monthly payment amount. RightCapital will automatically calculate the amortized monthly payment amounts based on all of the inputs described above.
At the bottom of the data entry drawer, you will find an option for an Early payoff. Choosing an option here will generate a lump sum within the projections to fully pay off the mortgage in the year indicated:
In the lower right, you can use the Link to house field to select the property this mortgage is associated with. The 'Default' option will link the mortgage to the client's Primary Home. In plans with multiple property entries, like investment and vacation properties, you can link each mortgage to its corresponding property:
Additional Information
ARM Cash Flows Location
ARM payments can be tracked within the Retirement > Cash Flows > Summary page, by clicking into the Expenses column.
- ARM principal and interest for the Primary Home will be reflected in the Housing column.
- ARM payments for other properties will be reflected in the Rental and Vacation Home column.
ARM balances can be tracked as they are paid down within the Cash Flows > Net Worth page, by clicking into the Mortgages column.
Refinance an ARM
You can model an ARM refinance within a client plan using a New Loan income card. Within this card you will find a 'Refinance' field, in which you can choose the mortgage (or other loan) you would like to refinance. This will apply a one-time payment to the selected loan, and any excess income will be added to cashflows:
New loan cards can be added to the current plan within the Profile > Income section. You can also propose a refinance using the same card in the Retirement Analysis module, using the Action Items.
