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Adjustable Rate Mortgage Calculator

Compare your initial ARM payment to what you'll pay after the rate adjusts, so there are no surprises down the road.

How it is calculated

The tool models a single rate reset. The payment for the fixed period is the standard amortizing payment over the full term at the initial rate: P1 = L × r1 × (1 + r1)^n ÷ ((1 + r1)^n − 1), where L is the loan amount in dollars, r1 is the initial annual rate ÷ 100 ÷ 12 and n is the total term in months. After the fixed years (p months) it works out the remaining balance, then re-amortizes that balance over the remaining n − p months at the adjusted rate to get P2. The difference is P2 − P1, shown with a minus sign if the rate falls. A 0% rate is handled as a plain division. The adjusted rate is one assumption you type; no index or periodic cap is applied. The loan must be positive, rates cannot be negative, and the total term must be longer than the fixed period, otherwise no result appears. Taxes and insurance are excluded.

Worked example

A $400,000 loan over 30 years starts at 5% for 5 years. With r = 0.05 ÷ 12 and 360 months the initial payment is $2,147.29. After 60 payments the remaining balance is about $367,315. Assume the rate then resets to 7.5% for the remaining 25 years (300 months): re-amortizing that balance gives $2,714.42 a month, so the difference is $567.14 more per month. If the rate fell to 3% instead, the new payment would be $1,741.85 and the difference would show as -$405.44.

Try this example →

Common mistakes

  • Entering the fixed period in months (such as 60). The field is in years, and 60 years is longer than the total term, so no result appears.
  • Entering the post-reset rate as the size of the increase (2.5 for a 2.5-point rise). The field is the full new annual rate, so type 7.5, not 2.5.
  • Expecting caps to be applied. Real ARMs limit how far the rate can move per adjustment; the tool uses exactly the rate you type, which may be higher than a cap would allow.
  • Assuming one reset is all that will happen. Later adjustments could raise or lower the payment again.
  • Entering the remaining term as the total term. The total term includes the fixed years, and it must exceed them.

Sources

About this calculator

An adjustable-rate mortgage starts with a fixed interest rate for an initial period and then shifts to a rate that can move up or down periodically based on a reference index, unlike a fixed-rate loan where the rate never changes. This calculator models what the monthly payment looks like during the initial fixed period and projects the payment after one rate reset: you enter the rate the loan moves to once the fixed period ends, and the remaining balance is re-amortized over the remaining term at that rate, along with the difference from the initial payment. It does not model repeated periodic adjustments or rate caps; to test them, run it again with a different adjusted rate.

Homebuyers use it to weigh an ARM against a fixed-rate mortgage, particularly when the ARM's initial rate is lower and they want to understand the payment risk if rates rise after the fixed period ends. It's especially relevant for buyers who expect to sell or refinance before the adjustable period begins.

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