What is the first step in determining an adjustable rate mortgage payment?

In determining an adjustable rate mortgage payment, the initial step involves finding the initial loan payment using the introductory or "teaser" rate. This rate is typically offered for a limited period at the beginning of the loan, making it crucial as it sets the basis for initial payments. The borrower will often benefit from lower payments during this initial period, which is essential for budgeting and financial planning.

Once the loan is established at this initial rate, future adjustments occur based on changes in the market interest rates. However, starting with the initial payment helps in understanding the cash flow required and lays the groundwork for any subsequent adjustments. After the initial phase, adjustments will consider remaining mortgage balances, calculated new payments based on adjusted interest rates, and interest rate caps, but those are subsequent steps that come after establishing the introductory payment.