ARM Calculator
Adjustable-rate mortgage payments: the fixed-period payment, the payment after each reset at the rate you assume, the worst case under the caps, and the total interest.
Result…
How it's calculated
Initial payment = L × i ÷ (1 − (1 + i)^−n), i = initial rate ÷ 12 At each reset: target = index + margin; new rate = target limited to ± the cap (first or periodic), at most initial rate + lifetime cap, at least 0 New payment = balance × i ÷ (1 − (1 + i)^−months left) Worst case: rate + full cap at every reset, up to the lifetime cap
Models an adjustable-rate mortgage: a fixed rate for the first years, then a reset every period to the index you assume plus the margin, limited by the first, periodic and lifetime caps. At each reset the balance is re-spread over the months left, so you see the payment for every period. It also runs the worst case allowed by the caps, so you know the most the payment could reach.
Your numbers, step by step
About the ARM calculator
This ARM calculator shows what an adjustable-rate mortgage could cost once its fixed period ends. Enter the loan amount, the term, the initial rate and how long it is fixed, then how often the rate resets. At each reset the new rate is the index you assume plus the margin, held back by the first adjustment cap, the periodic cap and the lifetime cap. The calculator re-spreads the balance over the months left and gives the payment in every period, the total interest and a worst case where the rate rises by the full cap at every reset. It is a scenario built from your own assumption, not a forecast, which makes it useful for testing whether a payment rise would still fit your budget. Every step shows the numbers it used.
How to use it
- Enter the “Loan amount”, the “Loan term” and the “Initial rate”.
- Enter the “Initial fixed period” and how often it “Adjusts every”, for example 5 years then every 1 year.
- Enter your “Assumed index rate” and the “Margin” from the loan terms; use “Index change at each later adjustment” to test a rising or falling index.
- Enter the “First adjustment cap”, the “Periodic cap” and the “Lifetime cap” from the loan terms.
- Read the payment after the first adjustment, the worst-case payment under the caps and the total interest in both cases.
Worked example
A 350,000 loan over 30 years starts at 5.75%, fixed for 5 years and then resetting every year, with caps of 2, 1 and 5 points. The initial payment is 2,042.50. With an assumed index of 4.25% and a margin of 2.75%, the rate moves to 7% at the first reset and the payment becomes 2,294.68, for 460,955.33 of interest in total. In the worst case the rate climbs to 10.75%, the payment reaches 3,090.89 and the interest is 684,461.80.
Updated
Questions people ask
How do I calculate an ARM payment after the rate adjusts?
Take the balance left at the reset and spread it over the months that remain at the new rate, using the usual loan payment formula. The new rate is the index plus the margin, limited by the caps.
What do the caps on an adjustable-rate mortgage mean?
The first adjustment cap limits the first change, the periodic cap limits each later change, and the lifetime cap limits how far above the initial rate the rate can ever go. Your loan terms list them, sometimes written as three numbers such as 2/1/5.
What is the worst-case payment on an ARM?
It is the payment if the rate rises by the full cap at every reset until it reaches the lifetime cap. Whatever the index does, the caps keep the payment from going higher than that.
Is the fully indexed rate the same as the initial rate?
Not usually. The initial rate is set for the fixed period, while the fully indexed rate is the index plus the margin, so the first reset can move the rate up or down.
Can this ARM calculator predict my future payments?
No. It only shows what happens under the index you assume, and some loans also have a floor rate or rounding rules it does not model. ARM terms differ by country and lender, so check them with your lender or a mortgage adviser, and compare a fixed loan with the mortgage calculator.