ARM Calculator
Calculate adjustable rate mortgage payments and analyze different interest rate scenarios. Compare your ARM loan options with rate caps and adjustment periods.
Payment Analysis
Initial Payment
Adjusted Payment
Maximum Payment
Total Interest
Understanding ARMs
An Adjustable Rate Mortgage (ARM) has an interest rate that changes periodically based on market conditions. ARMs typically start with a lower initial rate than fixed-rate mortgages, but your payment can increase (or decrease) over time.
Key ARM Features
- Initial Fixed Period: The number of years your rate stays fixed before adjusting (e.g., 5 years in a 5/1 ARM).
- Adjustment Period: How often the rate changes after the initial period (typically annually).
- Adjustment Cap: The maximum amount your rate can increase at each adjustment period.
- Lifetime Cap: The maximum amount your rate can increase over the life of the loan.
- Index + Margin: ARMs are based on an index (like SOFR) plus a fixed margin set by the lender.
ARM vs Fixed-Rate Mortgage
When an ARM Makes Sense
- • You plan to sell or refinance within 5-7 years
- • You expect your income to increase
- • Interest rates are expected to fall
- • You want lower initial payments
When Fixed-Rate is Better
- • You plan to stay in the home long-term
- • You prefer predictable payments
- • Interest rates are expected to rise
- • You're on a fixed income
ARM Planning Tips
Understand the Caps
Rate caps protect you from drastic payment increases. Always understand your periodic adjustment cap (how much the rate can change per adjustment) and lifetime cap (the maximum rate over the loan's life). Even if rates skyrocket, your rate can't exceed these caps.
Budget for Payment Increases
Make sure you can afford the maximum possible payment based on the lifetime cap. Don't rely on rates staying low or assume you'll definitely refinance or move before the first adjustment. Plan for the worst-case scenario to avoid financial stress.
Consider the Adjustment Timeline
Common ARM types include 3/1, 5/1, 7/1, and 10/1 (the first number is the initial fixed period, the second is how often it adjusts). If you're confident you'll sell or refinance within the fixed period, an ARM can save you money. But be realistic about your plans.
Note: This calculator provides estimates based on the information you enter. Actual ARM terms and adjustments may vary by lender and depend on the specific index used. Interest rates and payments can fluctuate based on market conditions. Rate caps and adjustment periods vary by loan type. Consult with a mortgage professional for accurate rates, terms, and personalized advice specific to your situation. Consider both the benefits and risks before choosing an ARM over a fixed-rate mortgage.
Recommended Calculator
Casio FX-991ES Plus
The professional-grade scientific calculator with 417 functions, natural display, and solar power. Perfect for students and professionals.
View on Amazon