# How to calculate payment shock?

Answer:
Sometimes borrowers end with mortgage payments that are significantly
higher than what they have been previously paying. This unpleasant situation is
commonly known as **payment shock**.

It can result from many things - such as the end of a fixed-rate period, a significant increase of the interest rate in an adjustable-rate mortgage loan, expiration of the temporary start (teaser) interest rate, end of an interest-only period, etc.

Many mortgage products, for example payment option ARMs, carry the risk of payment-shock. Therefore, underwriters should be aware of the payment shock risk and include it in their evaluation when approving a mortgage loan.

## Calculating Payment Shock

In order to calculate the payment shock, start with the new housing payment and divide it by your old/existing payment (PITI). The result will be the percentage increase.

For example, if your new payment is $2,100 and your existing payment is $1,200, then the percentage increase will be 2,100 / 1,200 = 1.75 or 75% increase.

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