Adjustable Rate Mortgage Calculator

Compare Fixed-Rate and Adjustable-Rate Mortgage Payments

Monthly Amortization Schedule

How This ARM Calculator Works

This ARM Calculator helps you compare a traditional fixed-rate mortgage with an adjustable-rate mortgage (ARM). You can estimate the beginning monthly payment, total payment, total interest, maximum monthly payment, and the effect of future rate adjustments over the life of the loan.

Enter the home price, down payment, loan term, fixed interest rate, adjustable beginning rate, adjustment amount, adjustment frequency, and rate cap. The calculator will generate a side-by-side comparison, charts, and a monthly amortization schedule.

This calculator compares two loan scenarios:

• Fixed-Rate Mortgage: The interest rate remains the same for the entire loan term.
• Adjustable-Rate Mortgage (ARM): The loan starts with a beginning interest rate, then adjusts by the selected amount at the chosen interval until the interest rate cap is reached.

What Is an Adjustable-Rate Mortgage (ARM)?

An adjustable-rate mortgage (ARM) is a home loan that begins with a fixed interest rate for an initial period and then adjusts periodically based on the loan terms. After the fixed period ends, the interest rate may increase or decrease at scheduled intervals, subject to any caps stated in the mortgage agreement.

Because ARMs often start with a lower initial rate than fixed-rate mortgages, they may offer lower beginning monthly payments. However, future payments can rise if interest rates increase.

5/1 ARM vs. 5/6 ARM Explained

A 5/1 ARM and a 5/6 ARM both start with a fixed introductory interest rate for the first five years of the loan. After that initial fixed period ends, the loan becomes adjustable for the remaining 25 years on a typical 30-year mortgage.

With a 5/1 ARM, the interest rate adjusts once every year after the first five years. With a 5/6 ARM, the interest rate adjusts every six months after the first five years.

In simple terms:

• 5/1 ARM: fixed for 5 years, then adjusts every 1 year.
• 5/6 ARM: fixed for 5 years, then adjusts every 6 months.

A 5/6 ARM may react to market changes more frequently, which can lead to payment changes sooner than a 5/1 ARM after the fixed-rate period ends.

Other common ARM products include 7/1 ARMs, 7/6 ARMs, 10/1 ARMs, and 10/6 ARMs. The first number shows how many years the initial rate stays fixed, and the second number shows how often the rate adjusts afterward.

Adjustable Rate Mortgage Example

Let’s say you took out a 30-year 5/1 ARM for $400,000 with an introductory rate of 6%. Here’s how your payment schedule might look, assuming interest rates rose annually by 0.25%. The ARM has a lifetime cap of 12%.

Total Payment: $1,039,144.29, Total Interest: $639,144.29

FAQ

Is an ARM Better Than a Fixed-rate Mortgage?

It depends on your goals, loan horizon, and comfort with payment changes. A fixed-rate mortgage offers stability, while an ARM may offer a lower initial rate.

What Does the Interest Rate Cap Mean?

The interest rate cap is the maximum rate the ARM can reach under the assumptions used in this calculator.

Does This Calculator Include Taxes and Insurance?

No. This calculator estimates principal and interest only. Property taxes, homeowners insurance, mortgage insurance, HOA fees, and other housing costs are not included.

References

For official consumer information about mortgage loans and adjustable-rate mortgages, please review guidance from the U.S. Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Housing and Urban Development (HUD).

• Consumer Financial Protection Bureau (CFPB) – Adjustable-rate mortgages: https://www.consumerfinance.gov/ask-cfpb/what-is-an-adjustable-rate-mortgage-arm-en-1949/
• Consumer Financial Protection Bureau (CFPB) – Home loan toolkit: https://www.consumerfinance.gov/owning-a-home/explore/home-loan-toolkit/
• HUD – Homeownership and housing counseling resources: https://www.hud.gov/topics/buying_a_home