How do I calculate what my payment will be with an ARM?

[Administrator]

I have an adjustable rate mortage at 8.46 (another part of our loan statement says 8 %) It says my interate rate will change by 3% percentage points based on the andquot;Indexandquot; the highest andquot;Prime Rateandquot; as published by the Wall Street Journal, but will never decrease below 3.5%. It will be calculated by addeing a 01.25% andquot;Margin to the current index. If my house payment is now $1027.15 how do I calculate what it could be? I was planning on refinancing, but I have poor credit and I have to pay a prepayment penalty if I pay it off. They have it worded so that I would have to pay if I pre-payed before the first rate adjustment. Can my payment be lower because of the current interest rate?


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(Source: mortgagefit.com)