Adjustable Rate Mortgage (ARM) Calculator

Loan Details

Rate Adjustment Rules

About This ARM Calculator

Our Adjustable Rate Mortgage (ARM) calculator helps you understand how your mortgage payments could change over time. It shows you:

  • Initial monthly payments during the fixed-rate period
  • Payment changes after rate adjustments begin
  • Maximum possible payment scenarios
  • Complete payment and rate schedule
  • Visual comparison of rates and payments over time

Understanding ARM Loans

Fixed Period

  • Initial period with fixed rate
  • Typically 3, 5, 7, or 10 years
  • Usually lower than fixed-rate mortgages
  • Predictable payments during this time

Adjustment Period

  • Rate adjusts periodically after fixed period
  • Based on index rate plus margin
  • Subject to adjustment caps
  • Can increase or decrease

ARM Components Explained

Index Rate

  • Benchmark interest rate
  • Common indexes: SOFR, Treasury
  • Changes with market conditions
  • Publicly available rates

Margin

  • Added to index rate
  • Set by lender
  • Remains constant
  • Based on credit risk

Rate Caps

  • Initial adjustment cap
  • Periodic adjustment cap
  • Lifetime cap
  • Protects from large increases

Types of ARMs

Common ARM Types

  • 5/1 ARM: Fixed for 5 years, then adjusts annually
  • 7/1 ARM: Fixed for 7 years, then adjusts annually
  • 10/1 ARM: Fixed for 10 years, then adjusts annually
  • 3/1 ARM: Fixed for 3 years, then adjusts annually

Best For

  • Short-term homeowners
  • Expected income growth
  • Planning to refinance
  • Lower initial payments

Rate Adjustment Rules

  1. Initial Adjustment Cap: Maximum rate increase at first adjustment
  2. Subsequent Adjustment Cap: Maximum rate change for each adjustment after the first
  3. Lifetime Cap: Maximum rate increase over the life of the loan
  4. Floor Rate: Minimum rate regardless of index changes
  5. Margin: Fixed percentage added to index rate

Important Considerations:

  • ARMs can increase or decrease over time
  • Consider worst-case payment scenarios
  • Understand all rate adjustment rules
  • Compare with fixed-rate mortgages
  • Plan for payment changes

When to Consider an ARM

Good Scenarios

  • Planning to move before first adjustment
  • Expecting significant income increase
  • Current high fixed rates
  • Comfortable with payment changes

Caution Scenarios

  • Long-term homeownership plans
  • Fixed income
  • Current low fixed rates
  • Tight monthly budget