An ARM starts with a lower fixed rate for a few years, then resets – typically every year (or every 6 months for SOFR ARMs) – based on an index plus a margin. Caps such as 2/1/5 limit each change and the lifetime increase.
How to use the ARM Mortgage Calculator
- Mortgage balance
- Term
- Interest rate at the beginning of the term
- ARM type
- Expected rate change at first adjustment
- First adjustment cap
- Lifetime cap above the start rate
- Points (% of loan)
- Up-front fees
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the loan amount, term, start rate, ARM type, expected first adjustment, the first-adjustment cap and the lifetime cap.
Tips
- Get a written loan estimate and compare the APR, not just the interest rate.
- Include property tax, insurance, HOA fees and maintenance in your monthly budget.
- A larger down payment lowers the payment and can remove mortgage insurance.
- Rates change daily – use a current quote for the most accurate result.
Common mistakes to avoid
- Looking only at the monthly payment instead of the total cost of the loan.
- Forgetting closing costs and fees.
- Assuming home prices always rise.
Inputs explained
| Field | What to enter |
|---|---|
| Mortgage balance | Amount in your currency |
| Term | In years |
| Interest rate at the beginning of the term | In % |
| ARM type | Choose one: 10/1 ARM, 7/1 ARM, 5/1 ARM, 3/1 ARM |
| Expected rate change at first adjustment | In % |
| First adjustment cap | In % |
| Lifetime cap above the start rate | In % |
| Points (% of loan) | In % |
| Up-front fees | Amount in your currency |
What each result means
- Initial monthly payment = pmt([Interest rate at the beginning of the term]÷1200, [Term]×12, [Mortgage balance])
- Balance when the rate first adjusts = bal([Mortgage balance], [Interest rate at the beginning of the term]÷1200, [Term]×12, [ARM type]×12)
- Rate after the first adjustment = [Interest rate at the beginning of the term] + min([Expected rate change at first adjustment], [First adjustment cap])
- Payment after the first adjustment = pmt([Rate after the first adjustment]÷1200, ([Term] – [ARM type])×12, [Balance when the rate first adjusts])
- Worst-case payment at the lifetime cap = pmt(([Interest rate at the beginning of the term] + [Lifetime cap above the start rate])÷1200, ([Term] – [ARM type])×12, [Balance when the rate first adjusts])
- Total interest if the new rate stays = [Initial monthly payment]×[ARM type]×12 + [Payment after the first adjustment]×([Term] – [ARM type])×12 – [Mortgage balance]
- Approximate APR (initial rate, with fees) = rate([Term]×12, 0 – [Initial monthly payment], [Mortgage balance] – [Up-front fees] – [Mortgage balance]×[Points (% of loan)]÷100)×1200
Example values
How the main result changes when Mortgage balance changes and everything else stays at the example values above:
| Mortgage balance | Payment after the first adjustment |
|---|---|
| 200,000 | 1,375.33 |
| 300,000 | 2,062.99 |
| 400,000 | 2,750.65 |
| 500,000 | 3,438.32 |
| 600,000 | 4,125.98 |
| 800,000 | 5,501.31 |
Formula
Initial payment = P × i ÷ (1 − (1 + i)^−n) at the start rateAfter the fixed period: balance re-amortised over the remaining term at the new rateNew rate = start rate + adjustment (limited by the first-adjustment and lifetime caps)Worked example
Inputs — Mortgage balance: $400,000; Term: 30 years; Interest rate at the beginning of the term: 6 %; ARM type: 5/1 ARM; Expected rate change at first adjustment: 1.5 %; First adjustment cap: 2 %; Lifetime cap above the start rate: 5 %; Points (% of loan): 0 %; Up-front fees: $3,000.
Results — Initial monthly payment = $2,398.20; Balance when the rate first adjusts = $372,217.43; Rate after the first adjustment = 7.5 %; Payment after the first adjustment = $2,750.65; Worst-case payment at the lifetime cap = $3,648.15; Total interest if the new rate stays = $569,088.31; Approximate APR (initial rate, with fees) = 6.07 %.
Frequently asked questions
What does 5/1 ARM mean?
The rate is fixed for 5 years, then adjusts every year.
What are ARM caps?
Limits on the first adjustment, each later adjustment and the total increase.
Is an ARM a good idea?
It can be if you expect to sell or refinance before the fixed period ends.
What formula does the ARM Mortgage Calculator use?
Initial payment = P × i ÷ (1 − (1 + i)^−n) at the start rate.