ARM Calculator
Calculate adjustable rate mortgage payments and see how your rate may change over time.
Loan Details
Rate Information
Understanding ARMs
Adjustable rate mortgages (ARMs) offer lower initial rates than fixed mortgages, but your rate can go up or down over time. The lower initial rate makes ARMs attractive for borrowers who don't plan to stay in the home long-term.
Common ARM Types
- 5/1 ARM: Fixed for 5 years, then adjusts annually. Most popular ARM product.
- 7/1 ARM: Fixed for 7 years, then adjusts annually. Good middle ground.
- 10/1 ARM: Fixed for 10 years, then adjusts annually. Longest fixed period.
- 5/6 ARM: Fixed for 5 years, then adjusts every 6 months. More frequent adjustments.
For a detailed comparison, see our 5/1 ARM vs 7/1 ARM guide.
ARM Rate Adjustment
After the initial fixed period, your rate adjusts based on market conditions. Understanding how this works helps you plan for worst-case scenarios.
How ARMs Adjust
- Index Rate: Market rate that fluctuates (SOFR, COFI, or Treasury yields)
- Margin: Lender's fixed markup, typically 2-3% added to the index
- Caps: Limits on how much the rate can increase per adjustment and over the loan's life
For example, if your index is 4.0% and your margin is 2.5%, your new rate would be 6.5% after the fixed period. Caps ensure your rate can only increase by a set amount — typically 2% per adjustment and 5% over the loan's lifetime.
When an ARM Makes Sense
- Planning to sell or refinance within the fixed period (5-10 years)
- Expecting your income to grow significantly in coming years
- Wanting the lowest possible initial payment to qualify for more home
- Current ARM rates are significantly lower than fixed rates
How to Use This Calculator
- Enter the loan amount and your down payment.
- Set the ARM initial (teaser) rate — typically 0.5-1% below the fixed rate.
- Choose the fixed period (5, 7, or 10 years).
- Set the expected adjustment rate and lifetime cap.
- Review the payment schedule showing how your payment changes over time.
The calculator shows your initial payment, potential adjusted payments, and the worst-case scenario based on your caps. Compare this to a fixed-rate mortgage to see which option saves you more over your expected time in the home.
ARM Caps Explained
ARM caps protect you from unlimited rate increases. Most ARMs use a 2-1-5 or 5-2-5 cap structure:
- Initial Cap (2% or 5%): Maximum increase at the first adjustment after the fixed period
- Periodic Cap (2%): Maximum increase at each subsequent annual adjustment
- Lifetime Cap (5-6%): Maximum rate increase over the life of the loan above the initial rate
Example: A 5/1 ARM starting at 5.0% with 2/2/5 caps means your rate can go to 7% at year 6 (first adjustment), 9% at year 7, and never above 10% (lifetime cap). Understanding these caps helps you plan for the worst-case payment scenario.
Frequently Asked Questions
What is an adjustable rate mortgage (ARM)? An adjustable rate mortgage (ARM) is a home loan with an interest rate that changes periodically based on market conditions. ARMs typically start with a fixed rate for a set period (like 5, 7, or 10 years), then adjust annually based on an index plus a margin.
What do ARM numbers mean? ARM numbers represent the fixed period and adjustment frequency. For example, a 5/1 ARM has a fixed rate for 5 years, then adjusts annually. A 7/1 ARM has a fixed rate for 7 years, then adjusts annually.
What are ARM caps? ARM caps limit how much your rate can adjust. There is typically a periodic cap (most allow 2% per adjustment), a lifetime cap (usually 5-6% over the initial rate), and a floor (the lowest rate possible, often equal to the margin).
How much can my ARM payment go up? The worst-case scenario depends on your caps. With a 5/2/5 cap structure (5% initial, 2% per adjustment, 5% lifetime), a $400k loan starting at 5.25% could rise from about $2,210/month to roughly $2,830/month at year 6 if rates move up sharply. See our ARM pros and cons guide for a worked example.
Frequently Asked Questions
What is an adjustable rate mortgage (ARM)?
An adjustable rate mortgage (ARM) is a home loan with an interest rate that changes periodically based on market conditions. ARMs typically start with a fixed rate for a set period (like 5, 7, or 10 years), then adjust annually based on an index plus a margin.
What do ARM numbers mean?
ARM numbers represent the fixed period and adjustment frequency. For example, a 5/1 ARM has a fixed rate for 5 years, then adjusts annually. A 7/1 ARM has a fixed rate for 7 years, then adjusts annually.
What are ARM caps?
ARM caps limit how much your rate can adjust. There is typically a periodic cap (most allow 2% per adjustment), a lifetime cap (usually 5-6% over the initial rate), and a floor (the lowest rate possible, often equal to the margin).
How much can my ARM payment go up?
The worst-case scenario depends on your caps. With a 5/2/5 cap structure (5% initial, 2% per adjustment, 5% lifetime), a $400k loan starting at 5.25% could rise from about $2,210/month to roughly $2,830/month at year 6 if rates move up sharply. See our pros and cons guide for a worked example.