This ARM calculator shows a fully amortizing ARM, which is the most common type of adjustable rate mortgage. The monthly payment is calculated to pay off the entire mortgage balance at the end of the term.
Some things to keep in mind when using our free adjustable rate mortgage calculator:
- Term: The term is typically 30 years.
- Increased Interest Rates: After the fixed interest rate period has passed, the interest rate and payment adjusts at the frequency specified. Our average is 0.25 percent per year.
- Maximum Rates: A fully amortizing ARM will also have a maximum rate that it will not exceed and the calculator uses a maximum rate of 12 percent.
What an Adjustable Rate Mortgage Is
An adjustable rate mortgage (ARM) is a home loan that has an initial fixed rate and then a periodically changing interest rate. Our adjustable rate mortgage calculator processes inputs including mortgage amount, loan term, and interest rate to calculate your monthly mortgage payment and the total amount of interest paid during the loan term.
For more information on an adjustable rate mortgage, rates, terms, and how it works, check out our in-depth guide on adjustable rate mortgages.
Here is some information to help you assess your results from the adjustable mortgage rate calculator:
- The ARM calculator calculates your initial monthly mortgage payment using a fixed interest rate.
- During the adjustable rate period, the ARM calculator calculates an estimated monthly mortgage payment because it can’t predict future interest rates and doesn’t know your lender’s rate cap.
- Current ARM rates start at 4.38 percent and the rate cap is usually at 12 percent or less, with average annual increases of 0.25 percent per year.
- The greatest risk with an ARM mortgage is the possibility that your interest rate will significantly increase to where your monthly mortgage payment is no longer affordable.
Getting a great mortgage for your property has never been easier. Fill out a short form on LendingTree and let multiple lenders compete for your loan. Their online marketplace enables you to quickly compare rates, offers, and find a good fit. Take a few minutes and see your options.
How the Adjustable Rate Mortgage Calculator Works
The adjustable rate mortgage calculator does the difficult calculations for you using an adjustable rate mortgage formula that incorporates a 30-year mortgage amortization table. So, instead of having to search for an amortization table, a mortgage calculator and doing calculations by hand, you can simply type your inputs into the calculator and it does the work for you.
The ARM monthly payments during the fixed rate period are calculated by using a 30-year amortization table and your interest rate. This is the same way that a conventional fixed rate mortgage calculator calculates your monthly mortgage payments.
However, with an ARM mortgage, the rates adjust after a set period of time, so the adjustable mortgage rate calculator offers an estimate of what your new monthly payment will be after the initial fixed rate period is over. Our free adjustable rate calculator uses an increase of 0.25 percent per year.
Keep in mind that this is an estimate based on the highest rates typically seen for ARMs, approximately 12 percent. The ARM calculator doesn’t know what your lender’s rate cap is, nor can it predict future rate increases or decreases.
The ARM calculator also calculates the total interest paid on the loan based on your initial fixed rate; after that fixed rate period is over, this too will be a conservative estimate based on what ARM rates typically max out at. Keep in mind that these are estimates, but you can use them to see if you can afford to pay the monthly payment when and if it adjusts to that amount, and if you want to pay the total interest shown.
ARM Calculator Inputs
When using our free ARM calculator, you will be prompted to input your mortgage amount, loan term and interest rate. These are the inputs the adjustable rate mortgage calculator needs in order to calculate things such as your monthly payment. The adjustable mortgage rate calculator uses an adjustable rate mortgage formula for its calculations, based off of an amortization schedule, allowing for a rate increase after the initial fixed rate period ends.
The details for each input into the adjustable rate mortgage calculator are:
Adjustable Rate Mortgage Amount
The first input that the adjustable rate mortgage calculator asks for is your mortgage amount. This is the amount that you’re financing. Typically, you will finance 80 percent to 95 percent with an adjustable rate mortgage. For example, if the purchase price of the property is $200,000 and you put down $40,000 as your down payment, your mortgage amount will be $160,000.
You can find your mortgage amount on your mortgage statement, by contacting your mortgage lender, or on your online mortgage account. If you saved your closing documents, your mortgage amount will also be on the mortgage documents that you signed.
Adjustable Rate Mortgage Loan Term
Here you would input the length of your total loan term, which is generally 30 years. Keep in mind that the most common ARMs are 5/1 and 7/1, which means that the interest rate is fixed for five and seven years, respectively, and then it can adjust once per year for the remainder of the 30-year term.
You can find your ARM loan term on your mortgage documents from settlement and on your mortgage statement. If you’re shopping around for an adjustable rate mortgage, the ARM lenders will tell you what terms they offer.
Adjustable Rate Mortgage Interest Rate
The next input is your interest rate. Keep in mind that the adjustable rate mortgage calculator is asking you to input your initial fixed interest rate. Typically, the initial fixed rate offered on an ARM is lower than that of a conforming loan, and ARM rates generally start at 4.38 percent.
You can find your interest rate on your mortgage documents from closing, and you can also request it from your lender. Our calculator uses an average of 4.4 percent if you don’t know your exact interest rate.
ARM Calculator Outputs
After you have entered all of the required inputs into the adjustable rate mortgage calculator, including your mortgage amount and interest rate, the ARM calculator will calculate the numbers for you and give you your estimated monthly mortgage payment and an estimate of the total interest paid during the loan.
Adjustable mortgage rate calculator outputs include:
Adjustable Rate Mortgage Monthly Mortgage Payment
The first output is your monthly mortgage payment, which is the amount of interest and principal that you pay monthly during the term of the loan. The calculator isn’t sure what your rate will adjust to after the fixed rate period is over, so it uses a rate of 12 percent because that’s usually the highest ARM rate. You will be able to see a “worst case scenario” rate on the adjustable rate calculator, and this can help you decide if an ARM mortgage is right for you
Total Interest Paid on an ARM
The next output that the calculator gives you is the total amount of interest you will pay during the loan term. This calculation is based on your interest rate, amortization during the loan and the loan term. You will be able to see how much your total interest is and compare it to what interest you would pay by using a different type of loan.
When to Use an ARM Mortgage
An ARM mortgage should typically be used if you plan on owning a property for a short period of time. An ARM mortgage can be right for you if you plan to sell or refinance the property before the interest rate adjusts. An ARM mortgage is also a great option if you’re looking for an initially low interest rate, because it’s usually lower than that of a conventional fixed rate loan.
“You should consider using an ARM mortgage if you have a short horizon for the property, particularly on larger loan sizes. If a borrower says that once their kids are out of college they intend to move to Florida, and their youngest child is 15 today, then a 7/1 ARM might be all they need. Generally, the shorter the initial fixed period the lower the interest rate.” – Andrew S. Weinberg, Principal, Silver Fin Capital Group LL
You should also keep in mind that property values change and it could be a risk if the market gets hit.
Alternatives to an Adjustable Rate Mortgage
An adjustable rate mortgage can be a great option for an owner occupant or real estate investor who wants to take advantage of initially low monthly mortgage payments, and is prepared to sell or refinance the property or deal with a possible rate increase. However, ARMs aren’t right for everyone because there is the risk factor involved that the rates may go up, making the new monthly mortgage payment unaffordable.
If an ARM isn’t right for you, there are some alternatives:
- Fixed Rate Mortgage: This is the most common type of mortgage; it is a fully amortized loan where the interest rate remains the same throughout the duration of the term.
- Balloon Mortgage: A loan in which a large portion of the principal is repaid in one payment at the end of the loan term. A balloon mortgage typically has a fixed rate that is amortized over 30 years, but the term is generally between five and seven years. A balloon mortgage is typically used to qualify for a larger loan amount and to take advantage of low rates and low monthly payments.
- Investment Property Loan: This type of loan is specifically for investors and can be found through banks, credit unions and online lenders. These loans usually have rates from 5 percent to 12 percent and terms of three to 30 years. Investors typically use these loans to purchase buy and hold properties.
Our free adjustable mortgage rate calculator uses the adjustable rate mortgage formula to calculate your monthly mortgage payments and the total amount of interest due during the duration of your loan term. The adjustable mortgage rate calculator can be used to help owner occupants and investors decide if an ARM is right for them based off the affordability of the monthly payment amounts.
Getting a mortgage for your property has never been easier. Fill out a short form on LendingTree and multiple lenders will compete for your loan. Their online marketplace enables you to quickly compare rates, offers, and find a good fit. It only takes a few minutes to see your options.