ARM Calculator
Adjustable-rate mortgage payment, reset risk, rate caps, and total interest versus a fixed loan.
An ARM calculator estimates the monthly payment on an adjustable-rate mortgage during its fixed introductory period and after each rate reset, using your initial, periodic and lifetime rate caps. It also compares total interest against a fixed-rate loan and shows the worst-case payment so you can see the payment shock before the rate adjusts.
ARM Calculator
Loan & Rates
Rate Caps (initial / periodic / lifetime)
A 2/2/5 cap structure is the most common on conforming ARMs.
Based on your results — what to do next:
Can you afford the worst case?
Your reset payment could reach $2,802.64/mo. Test the home price you can still carry at that level.
Plan your exit before the reset
With about $371,049 left when the rate adjusts, see if refinancing into a fixed loan beats staying put.
Compare against a fixed loan
The 6.75% fixed alternative costs $2,594.39/mo, $260.10 more than your intro payment.
How Adjustable-Rate Mortgage Payments Are Calculated
① Intro payment
M = L × i ÷ (1 − (1 + i)−n)
i = intro rate ÷ 12, n = total months in the term
② Reset payment
M₂ = B × i₂ ÷ (1 − (1 + i₂)−(n−k))
B = balance when the rate adjusts, k = months already paid, i₂ = new monthly rate
③ Rate cap
New rate = min(Old rate + Rise, Old rate + Cap, Intro rate + Lifetime cap)
The first reset uses the initial cap; later resets use the periodic cap
| Variable | Meaning | Typical Value |
|---|---|---|
| L | Loan amount | Your mortgage principal |
| Intro rate | Starting rate | Usually 0.5–1.5% below fixed |
| Caps | Initial / periodic / lifetime | 2/2/5 is most common |
| Fixed period | Years before first reset | 3, 5, 7 or 10 |
Worked Example — $400,000, 5/1 ARM at 5.75%, 30 years, 2/2/5 caps
- Intro payment: $2,334/month for 60 months
- A 6.75% fixed loan would cost $2,594/month — an intro saving of about $15,606
- Balance at first reset: ≈ $371,049
- Worst first reset (rate +2% to 7.75%): payment jumps to ≈ $2,803/month
- Lifetime maximum rate: 5.75% + 5% = 10.75%
💡 Pro-Tip
Qualify at the cap, not the teaser. Ask what you could afford if the rate reached its lifetime maximum, and plan to refinance or sell before the first reset. An ARM wins when you are confident you will move or refinance inside the fixed window; it loses when you plan to stay and rates rise.
ARM Calculator FAQ
What does a 5/1 ARM mean?
The rate is fixed for the first 5 years, then adjusts once every year. The 5 is the fixed period and the 1 is how often it adjusts afterward.
What do 2/2/5 rate caps mean?
The rate can rise at most 2 points at the first adjustment, 2 points at any later adjustment, and 5 points total over the life of the loan.
Is an ARM cheaper than a fixed-rate mortgage?
Usually during the intro period, because the starting rate is lower. Over the full term it depends on how rates move after the first reset.
Can I refinance an ARM before it resets?
Yes, many borrowers refinance into a fixed loan before the first adjustment, but approval and rates depend on your credit, equity and market conditions at that time.