Enter the loan, the starting rate, the fixed period and the 3 rate caps to see what you pay during the teaser period, after each reset and in the worst case. Compare total interest with a fixed-rate loan.
Last updated:
Loan
$
%
Rate caps
%
Max change at the first reset.
%
Max change at each later reset.
%
Max rise above the initial rate over the loan.
Expected future rate
%
e.g. 30-day average SOFR or 1-yr Treasury.
%
Fixed markup in your loan note.
%
Optional. Leave blank to skip.
Enter your values to see the result.
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How to use the Adjustable Rate Mortgage Calculator
Enter the loan amount, term and initial rate from your loan estimate.
Pick the fixed period and how often the rate adjusts: a 5/6 ARM is fixed for 5 years, then adjusts every 6 months.
Enter the rate caps in the order initial / subsequent / lifetime, or click a preset.
Set the expected index rate and your margin; together they give the fully indexed rate the loan moves toward.
Read the payment after the first reset and the worst case, then check the period table and the interest chart against a fixed-rate loan.
How an adjustable rate mortgage payment changes
During the fixed period the payment is a normal amortizing payment:
M = P × r ÷ (1 − (1 + r)−n)
where P is the loan amount, r the monthly rate (annual rate ÷ 12 ÷ 100) and n the number of months. At each reset the lender:
Looks up the index (for most new US ARMs, the 30-day average SOFR) and adds your margin to get the fully indexed rate.
Limits the change to the adjustment cap (initial cap at the first reset, subsequent cap after that).
Keeps the result within the lifetime cap (start rate + lifetime cap).
Re-amortizes the remaining balance over the remaining months at the new rate, which gives the new payment.
The worst case assumes the rate rises by the full cap at every reset until it reaches the lifetime ceiling. That is the payment you should be able to afford before choosing an ARM.
Common ARM types and caps
ARM
Fixed period
Adjusts
Typical caps
Max rate on a 6% start
3/1
3 years
every 12 months
2/2/6
12%
5/1
5 years
every 12 months
2/2/5
11%
5/6
5 years
every 6 months
2/1/5
11%
7/6
7 years
every 6 months
5/1/5
11%
10/6
10 years
every 6 months
5/1/5
11%
Caps are written as initial / subsequent / lifetime. Your exact caps, index, margin and any rate floor are listed in the loan estimate and the promissory note; use those numbers here.
Questions to ask before choosing an ARM
How long will I keep the loan? If you plan to move or refinance before the first reset, the lower start rate is the main thing that matters.
Can I afford the worst-case payment? Compare it with your budget, not with today's payment.
What is the margin? The margin never changes, so a lower margin keeps every future rate lower.
Is there a prepayment penalty or a rate floor? Both limit how much you benefit if rates fall.
How is an ARM payment calculated after a rate change?
At each reset the lender takes the remaining balance and re-amortizes it over the remaining months at the new rate, using the standard formula M = P × r ÷ (1 − (1 + r)^−n). The new rate is the index plus the margin, limited by the adjustment cap and the lifetime cap.
What do ARM caps like 2/1/5 mean?
The first number is the initial adjustment cap (the most the rate can change at the first reset), the second is the subsequent cap for each later reset, and the third is the lifetime cap above the starting rate. With a 6% start and 2/1/5 caps, the rate can reach 8% at the first reset, then rise 1 point per reset, and never exceed 11%.
What is the difference between a 5/1 and a 5/6 ARM?
Both are fixed for the first 5 years. A 5/1 ARM then adjusts once a year, while a 5/6 ARM adjusts every 6 months. Most newer ARMs in the US are tied to SOFR and adjust every 6 months.
What is the fully indexed rate?
It is the index (such as 30-day average SOFR or the 1-year Treasury) plus the margin written in your loan note. After the fixed period your rate moves toward the fully indexed rate, but only as far as the caps allow at each reset.
Can an ARM rate go down?
Yes. If the index falls, the rate can drop at a reset, usually by up to the same adjustment cap. Many loans also have a floor, often equal to the margin or the start rate, so check your note. This calculator lets the rate fall to the fully indexed rate but never more than the lifetime cap below the start.
When does an ARM make sense?
An ARM can cost less if you expect to sell or refinance before the fixed period ends, because the starting rate is often lower than a fixed rate. Make sure you could afford the worst-case payment shown here if you end up keeping the loan.
Does this include taxes and insurance?
No. The figures are principal and interest only. Add property tax, homeowners insurance, PMI and HOA fees to get your full monthly housing cost.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.