ARM Mortgage Calculator

Calculate your adjustable rate mortgage payments, including initial fixed period and future rate adjustments. Free ARM calculator with rate caps.

Enter Your ARM Details

$
%
years fixed
Select a common ARM type or enter custom values
months
How often the rate adjusts after the fixed period (typically 6 or 12 months)
years
%
Current index rate (e.g., SOFR, Treasury rate)
%
Lender's margin added to index rate
%
Maximum rate increase at first adjustment
%
Maximum rate increase per adjustment period
%
Maximum rate increase over the life of the loan
Initial Monthly Payment
$1,703
First Adjustment Rate
7.000%
First Adjustment Payment
$1,960
Payment Increase
+$257
Maximum Possible Rate
10.500%
Maximum Possible Payment
$2,744
Total Interest (Fixed Period)
$79,584

How to Calculate Your ARM Mortgage Payment

An Adjustable Rate Mortgage (ARM) offers an initial fixed interest rate for a set period, followed by periodic rate adjustments based on market conditions. Our ARM calculator helps you understand your payment structure and plan for future adjustments.

Understanding ARM Mortgages

ARM mortgages are typically described with two numbers (e.g., 5/1 ARM):

- First number: Years the rate stays fixed (5 years)- Second number: How often the rate adjusts after the fixed period (annually)

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Key ARM Features

- Initial Fixed Period: Your rate and payment stay the same during this period

- Index Rate: A benchmark rate (like SOFR or Treasury rate) that your ARM rate is based on
- Margin: A fixed percentage added to the index rate to determine your adjusted rate
- Rate Caps: Limits on how much your rate can increase

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Rate Caps Explained

ARM mortgages typically have three types of caps:

1. Initial Cap: Maximum rate increase at the first adjustment
- Periodic Cap: Maximum rate increase per adjustment period
- Lifetime Cap: Maximum rate increase over the entire loan term

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Using This Calculator

To calculate your ARM mortgage payment:

1. Enter your loan amount
2. Input your initial interest rate and fixed period
3. Set your adjustment period (usually 1 year)
4. Enter the current index rate and margin
5. Optionally set rate caps to see worst-case scenarios

The calculator will show:
- Your initial monthly payment during the fixed period
- Projected payment after the first adjustment
- Maximum possible payment based on rate caps
- Total interest paid during the fixed period

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ARM vs Fixed-Rate Mortgage

ARMs typically offer lower initial rates than fixed-rate mortgages, making them attractive for:

- Buyers who plan to move or refinance before the fixed period ends
- Those expecting interest rates to decrease
- Buyers who need lower initial payments

However, ARMs carry the risk of payment increases if rates rise. Always consider your ability to handle maximum payments when choosing an ARM.

Frequently Asked Questions

Q: What is a 5/1 ARM?
A: A 5/1 ARM has a fixed rate for the first 5 years, then adjusts annually (every 1 year) based on market conditions. The rate is calculated as the index rate plus the margin, subject to rate caps.
Q: How is the ARM rate calculated after the fixed period?
A: After the fixed period, the rate is calculated as Index Rate + Margin. This new rate is subject to rate caps (initial cap, periodic cap, and lifetime cap) to limit how much it can increase.
Q: What happens if interest rates go up?
A: If interest rates rise, your ARM rate will increase at each adjustment period, up to the periodic cap. Your monthly payment will increase accordingly. The lifetime cap ensures your rate can never exceed a certain maximum.
Q: Should I choose an ARM or fixed-rate mortgage?
A: ARMs are best if you plan to move or refinance within the fixed period, or if you expect rates to decrease. Fixed-rate mortgages provide payment stability but typically have higher initial rates. Consider your financial situation and risk tolerance.
Q: What is the margin on an ARM?
A: The margin is a fixed percentage that your lender adds to the index rate to determine your adjusted interest rate. It's set when you take out the loan and doesn't change. Typical margins range from 2% to 3%.

Disclaimer

Financial Disclaimer: This calculator is for informational and educational purposes only. The results are estimates and should not be considered as financial, investment, tax, or legal advice. Actual results may vary based on individual circumstances, market conditions, and other factors. Always consult with qualified financial professionals before making financial decisions.

Last updated: December 30, 2025