Calculator
Adjustable Rate Mortgage Calculator: ARM Mortgage Payment Estimator
-
-
Copied link to Clipboard!
Adjustable rate mortgages typically offer home buyers the advantage of having a lower mortgage down payment during the initial period of the mortgage. Adjustable rate mortgages are generally offered on a 1, 3, 5 or 7-year basis. Once the initial period expires, the mortgage rate will reset at then current interest rate levels. Depending on the direction loan rates are taking, these resets can result in higher or lower monthly payments to the borrower. This adjustable rate mortgage analyzer will help you understand the implication of your adjustable rate terms by showing what your monthly payment will be under different scenarios.
Adjustable Rate Mortgage Calculator FAQs
To calculate an adjustable-rate mortgage (ARM), you need to know the initial interest rate, the adjustment period, the annual rate adjustment, the margin, the interest rate cap and the initial loan balance. With this information, you can use the Adjustable Rate Mortgage Calculator to estimate your monthly payments and the new payment after the rate adjustment.
Unlike fixed-rate mortgages, ARMs typically have lower initial interest rates, resulting in lower monthly payments initially; however, the interest rate and payment amounts can increase over time. It's essential to use an ARM calculator to compare the costs and risks of an ARM versus a fixed-rate mortgage and to consider factors such as how long you plan to live in the home and how confident you are in your ability to make higher payments if the interest rate rises.
The amortization period for a 5-year adjustable-rate mortgage (ARM) can vary depending on the loan. Some 5/1 ARMs may be amortized over 30 years, while others may have a shorter amortization period of 25 or 15 years.
To calculate an ARM rate, you must know the index rate, margin and interest rate cap. The index rate is a published interest rate, such as the Secured Overnight Financing Rate (SOFR), while the margin is a fixed percentage rate that is added to the index rate. Once the initial period ends, at each rate adjustment, the lender will add the margin to the index rate to compute your new ARM rate, but the new ARM cannot exceed the stipulated interest rate cap. For example, if the SOFR is 4% and the margin is 1.8%, your new mortgage rate is 5.8%.