ARM Calculator
See how an adjustable-rate mortgage payment can change after the fixed period, and compare it with a fixed-rate loan
Adjustable-Rate Loan
Above the starting rate
Index + margin
Payment for the first 5 years
$2,334.29
Could rise to $3,551.69 if the rate climbs to its 10.75% cap · fixed-rate payment $2,528.27
After the first reset
$2,622.50
at 7.00% in month 61
Worst-case payment
$3,551.69
at the 10.75% lifetime cap
Fixed-rate payment
$2,528.27
6.500% for 30 years
Lifetime interest vs fixed
$16,628
more with the ARM, in the expected case
Monthly payment over the loan
Expected path, worst case and the fixed-rate option
Interest rate over the loan
Caps limit each change and the lifetime maximum
Worst-Case Rate Changes
| From Payment | Rate | Monthly Payment | Change vs Start |
|---|---|---|---|
| #1 (year 1) | 5.750% | $2,334.29 | +$0.00 |
| #61 (year 6) | 7.750% | $2,802.64 | +$468.35 |
| #67 (year 6) | 8.750% | $3,047.50 | +$713.21 |
| #73 (year 7) | 9.750% | $3,297.42 | +$963.13 |
| #79 (year 7) | 10.750% | $3,551.69 | +$1,217.40 |
The worst case assumes the rate rises by the full cap at every adjustment until it reaches the lifetime cap.
How an ARM Works
An adjustable-rate mortgage starts with a fixed rate, often lower than a fixed-rate loan, for 3 to 10 years. After that the rate resets to an index (usually SOFR) plus a margin, every 6 or 12 months. Caps limit how far it can move: a typical 2/1/5 structure allows up to 2 points at the first reset, 1 point after that, and 5 points above the starting rate over the life of the loan.
The Formulas
New rate = index + margin, within the caps
New payment = remaining balance amortized over the remaining term
Ceiling = starting rate + lifetime cap
Your loan estimate lists the margin, the index and the caps.
Is an ARM Right for You?
- •ARMs suit buyers who expect to sell or refinance before the first reset
- •Make sure you could afford the worst-case payment
- •Compare the savings during the fixed period with the risk afterwards
- •Ask how the rate is calculated after the fixed period ends
- •Refinancing later isn't guaranteed if rates rise or your finances change