ARM Calculator
Calculate adjustable-rate mortgage payments and see worst-case scenarios with lifetime rate caps.
Before you calculate
Future index rates are scenarios, not forecasts. Your contract determines reset dates, caps, floors and payment recalculation.
Adjustable-Rate Mortgage (ARM)
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 monthsExample Scenarios
5/1 ARM to Buy and Refinance
A 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.
Short-Term Homeowner
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.
Methodology & Assumptions
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.
Sources & calculation notes
Maintained by MoneyCalc. Results are estimates based on the inputs and assumptions shown, not personalized financial advice or a lender quote. Default rates are examples unless a specific tax year or official table is identified.
References explain the underlying concepts or rules. They do not endorse or independently certify this implementation.
Calculations run in your browser. Some tools retain settings on this device. Displayed rounding can produce small differences from a statement or contract.