ARM Adjustable Rate Mortgage Calculator
Calculate payments for adjustable-rate mortgages. Compare initial rates vs. adjusted rates with rate caps and payment changes.
How it works
ARM mortgages start with a fixed rate, then adjust periodically based on market indices. Rate caps limit how much rates can increase.
Example
5/1 ARM at 3.5% initial rate: Payment fixed for 5 years, then adjusts annually. 2% cap limits first adjustment to 5.5% maximum.
FAQ
When do ARM rates adjust?
After the initial fixed period (3, 5, 7, or 10 years), rates typically adjust annually based on a benchmark index plus a margin.
What are rate caps?
Rate caps limit increases: initial cap (first adjustment), periodic cap (subsequent adjustments), and lifetime cap (maximum over loan term).
What index do ARMs use?
Common indices include 1-year Treasury, SOFR, or 11th District Cost of Funds. The new rate = index + margin.
Are ARMs risky?
ARMs carry interest rate risk - payments can increase significantly. They're best for borrowers planning to sell/refinance before adjustment or expecting rates to fall.
When do ARMs make sense?
ARMs can save money when initial rates are much lower than fixed rates, for short-term ownership, or when expecting income growth to offset payment increases.