Adjustable-Rate Mortgage (ARM) Calculator

Adjustable-rate mortgage (ARM) payment calculator

An adjustable-rate mortgage (ARM) can start with a lower interest rate than a fixed-rate loan, then change later based on a reference rate (an index) plus a lender margin. This calculator estimates your monthly payment during the fixed period and then projects how payments might change after adjustments begin. It is designed for two common use cases: a quick affordability check and a more careful stress test of what payments could become.

To use it quickly, enter your loan amount, initial interest rate, loan term, and the initial fixed period. You will immediately get an initial monthly payment and a projected payment path after the fixed period. If you want a more realistic ARM projection, fill in the optional fields for index rate, margin, and caps. These inputs define how the rate can move at each adjustment and the maximum rate you can reach over the life of the loan.

The key output is not just one number. You will see the initial payment, the payment right after the first adjustment, and a projected maximum payment under the cap rules you entered. This helps you answer practical questions like: Can I afford the payment today, can I afford the first adjustment, and what payment should I be able to survive if rates move against me over time.

Assumptions and how to use this calculator

• This calculator assumes a standard amortizing mortgage where the balance is repaid over the full term with monthly payments.
• After the fixed period, the rate is estimated using: fully indexed rate = index rate + margin, then limited by the periodic cap, lifetime cap, and floor.
• The projection assumes your index rate and margin inputs stay constant over time. Real index values can rise or fall, changing the result.
• Rate caps are applied at each adjustment point, and the monthly payment is recalculated to pay off the remaining balance over the remaining term.
• Fees, insurance, taxes, and escrow are not included. The output is principal-and-interest only, which is usually the base payment shown in loan quotes.

Common questions

What is an ARM “index” and “margin”?

The index is a published reference rate that moves with broader interest rates. The margin is a fixed percentage added by the lender. Your adjusted rate is typically the index plus the margin, then limited by the cap rules in your loan contract. If you do not know your exact loan index and margin, the defaults can still produce a reasonable estimate for planning.

Why does the payment change when the rate changes?

When the rate adjusts, lenders generally recalculate your payment so the remaining loan balance is still paid off by the end of the original term. If the rate goes up, more of each payment goes to interest, so the total payment usually rises to stay on schedule. If the rate goes down, the payment can decrease. This calculator models that standard recalculation.

What do periodic caps and lifetime caps mean in practice?

A periodic cap limits how much the rate can change at a single adjustment, measured in percentage points. A lifetime cap limits how far the rate can rise above the initial rate over the entire loan life. These caps are why an ARM often does not jump straight to the fully indexed rate in one move. If you want a conservative plan, assume caps are reached over time and look at the projected maximum payment.

What if I do not know the index rate today?

If you do not know the current index value used by your lender, use a reasonable estimate and test a few scenarios. For example, you can try a lower index and a higher index to see how sensitive payments are. The goal is not perfect prediction. The goal is to understand the size of the risk and whether your budget can handle it.

When does this calculator not apply?

This calculator is a good fit for typical amortizing ARMs. It may not apply if your loan has interest-only periods, negative amortization features, or unusual recast rules. It also does not include taxes and insurance, which can be a major part of the total monthly payment. Use the principal-and-interest result as a base, then add your expected non-loan costs separately.