Calculators · Buying & Financing

Adjustable-Rate Mortgage (ARM) Calculator

See how an ARM payment can change after the fixed period using the caps, floor and margin from the note, under index scenarios you choose instead of rate predictions.

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How this calculator works

An adjustable-rate mortgage has a fixed rate for an initial period (3, 5, 7 or 10 years), then adjusts. At each adjustment the new rate is the index plus the margin, limited by caps: a first-adjustment cap, a cap on each later adjustment, and a lifetime cap above the start rate. Many notes also set a floor.

No one can predict where the index will be in five years, so this calculator shows four what-if paths: the index stays where you set it, rises a step at each adjustment, falls a step, and the worst case the caps allow.

New rate = index + margin, rounded to the nearest 1/8 point, then held within the caps and the floor.
At each change, the payment is recalculated so the loan still pays off over the months that remain.
The worst-case row is the highest payment your caps permit, which is the number to plan around.

Worked example

Example values are illustrative, not quotes or market data. These are the numbers the calculator above starts with.

Inputs

Home price: $400,000
Down payment: $40,000 (10%)
Loan length: 30 years
ARM type: 5/6 (5 years fixed, then every 6 months)
Starting rate: 6%
Margin: 2.75%
First adjustment cap: 2%
Later adjustment cap: 1%
Lifetime cap (above the start rate): 5%
Index value to test: 4%
Rise or fall per adjustment: 0.5%

Results

Loan amount: $360,000
Fixed-period payment: $2,158
Payment if the index stays flat (after first change): $2,315
Highest payment allowed by caps: $3,267
Total interest, index flat: $463,858

Common questions

What do caps like 2/1/5 mean?

The rate can move up to 2 points at the first adjustment, 1 point at each later adjustment, and never more than 5 points above the starting rate. Your Loan Estimate lists the caps for your loan.

What index do ARMs use now?

Most new ARMs use the 30-day average SOFR. Your note names the index; check its current value from the source your lender identifies.

When does an ARM make sense?

Often when you expect to sell or refinance before the first adjustment, and you can afford the worst-case payment if you don't.

Related calculators

Estimate only. Actual loan terms, eligibility, insurance, taxes, and settlement charges require verification. These are planning estimates, not a lender Loan Estimate, Closing Disclosure, appraisal, or approval. Michael O'Neal is a real estate broker, not a lender, appraiser, attorney or tax adviser.

Next step

Want a real financing quote? Connect with Home Front Mortgage.

Andrew Fairleigh, Mortgage Loan Originator, Home Front Mortgage, NMLS #1878546. (979) 595-8979 · [email protected]

Start Your Application Andrew's profile

Rates in these calculators are examples, not Home Front quotes. Your application goes to Home Front's secure site. Do not send financial documents through this website.

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