ARM Calculator
Calculate adjustable-rate mortgage payments and see worst-case scenarios with lifetime rate caps.
Calculate adjustable-rate mortgage payments and see worst-case scenarios with lifetime rate caps.
Rate for the initial fixed period
Max rate change per adjustment period
Max total increase over initial rate
An ARM offers a lower initial rate for a fixed period (e.g., 5 years), then adjusts periodically based on a market index plus a margin. Two caps protect borrowers: the periodic cap limits how much the rate can change per adjustment, and the lifetime cap limits the total rate increase above the initial rate.
Adjusted Rate = Index + Margin (subject to caps) | New Payment = Balance × [r(1+r)^n] / [(1+r)^n − 1] | where n = remaining monthsA 5/1 ARM at 6% vs. a 30-year fixed at 7% saves $200/month initially. If rates fall in 5 years, you refinance to a fixed loan. If rates rise, your payment could spike — the strategy depends on rate outlook and your risk tolerance.
If you plan to sell before the fixed period ends, an ARM captures the lower initial rate with no adjustment risk. This is a common strategy for buyers who know they'll move within 5–7 years.
Initial payment uses full amortization over loan term. Remaining balance is computed by amortizing through the fixed period. Adjusted payments use remaining balance and remaining term.