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). ARMs are named by their structure — a 5/1 ARM is fixed for 5 years, then adjusts every 1 year.
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 — your payment may drop after adjustment
- You need a lower initial payment to qualify for a larger loan
Risk: If rates rise sharply, your payment after the fixed period could increase significantly.