ARM Mortgage Calculator
Compare fixed-rate and adjusted-rate payments for a 5/1, 7/1, or 10/1 ARM.
See how rate caps affect your monthly payment after the fixed-rate period ends.
Adjustable-Rate Mortgage (ARM)
An ARM starts with a fixed interest rate for an initial period, then adjusts periodically based on a market index (typically SOFR or the 1-year Treasury) plus a fixed margin the lender sets. ARMs are named by their structure: a 5/1 ARM is fixed for 5 years, then adjusts every 1 year after that.
Monthly payment formula:
Payment = P × [r(1+r)^n] / [(1+r)^n - 1]
Where: P = principal, r = monthly rate, n = remaining months
ARM name decoder:
| ARM Type | Fixed Period | Adjustment Frequency |
|---|---|---|
| 3/1 ARM | 3 years | Every 1 year |
| 5/1 ARM | 5 years | Every 1 year |
| 7/1 ARM | 7 years | Every 1 year |
| 10/1 ARM | 10 years | Every 1 year |
Rate caps, the most important ARM feature:
| Cap Type | What it limits |
|---|---|
| Initial cap | Maximum change at first adjustment (e.g., +2%) |
| Periodic cap | Maximum change at each subsequent adjustment (e.g., +2%) |
| Lifetime cap | Maximum total change over the life of the loan (e.g., +5%) |
A 5/1 ARM with caps of 2/2/5 means: first adjustment can go up at most 2%, each later adjustment at most 2%, and the rate can never be more than 5% above the initial rate.
When ARMs make sense:
- You plan to sell or refinance before the fixed period ends
- Rates are expected to fall, in which case your payment drops at the adjustment
- You need a lower initial payment to qualify for a larger loan
The question that actually matters. Not “what do I think rates will do” but “can I pay the worst case?” The lifetime cap is a number you sign, and it is the only rate the lender has genuinely committed to staying under. Work out the payment at start rate plus the lifetime cap and ask whether that figure is survivable. If it is not, the ARM is a bet rather than a mortgage.
The calculator above shows that worst-case payment alongside the one you expect, because plenty of people who took 3% ARMs in 2021 found out the hard way that the expected number was the wrong one to plan around.
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
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