Adjustable Rate Mortgage Calculator

Adjustable Rate Mortgages (ARM) start at one interest rate, which changes during the life of the loan. The change may be triggered with time or for some other reason. It is just as important to understand your adjustable rate mortgage payments as it is for a fixed-rate mortgage. This Adjustable Rate Mortgage Calculator will show the expected interest costs for the life of a variable rate loan, complete with an amortization schedule. When you’re finished, you can save your calculations as a PDF.

Adjustable Rate Mortgage Calculator

Please fill out this form

First Name*
Last Name*


Loan Amount:
Number of Months (original terms):
Starting Interest Rate:
Incremental Interest Rate:
Number of Rate Changes:
Ending Interest Rate:
Monthly Payment (first six months):
Monthly Payment (next six months):
Monthly Payment (next six months):
Monthly Payment (next six months):
Monthly Payment (next six months):
Monthly Payment (next six months):
Monthly Payment (for remainder of loan):
Total Interest Paid on Loan:


Amortization Schedule

PaymentPrincipalInterestLoan Balance

Remaining Loan Balance

Save as PDF

By using this calculator you agree to terms and conditions. These calculators are designed to be informational and educational tools only, and when used alone, do not constitute investment or financial advice. We strongly recommend that you seek the advice of a financial services professional before making any type of investment or deciding on your financial matters. This model is provided as a rough approximation of future financial performance. The results presented by this calculator are hypothetical and may not reflect the actual growth of your own investments. We can't take into account potential lender fees, payoff schedule can be longer than in the estimation. Mortgagecalculator and its affiliates are not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by these tools. Mortgagecalculator is not responsible for any human or mechanical errors or omissions.

Step-by-Step Instructions for Using the Adjustable Rate Mortgage Calculator

Please note that some inputs can be either manually entered in the correct box or adjusted using the sliding scale.

  1. Enter the loan amount and the number of months.
  2. Input the beginning and ending interest rates.
  3. Type in the incremental rate of interest.

The adjustable rate mortgage calculator will adjust your results as you enter the numbers in real time.

Important Terms And Definitions

  • Loan Amount – The original amount of the mortgage loan. This may also be known as the principal.
  • Beginning Interest Rate – The initial cost of the loan, represented as an annual percentage rate (APR).
  • Ending Interest Rate – The final cost of the loan, represented as an annual percentage rate (APR).
  • Incremental Rate of Interest – The rate at which the interest rate increases.
  • Number of Rate Changes over the Life of the Loan – The number of times the incremental rate of interest will apply.
  • Number of Months – The time, in months, that it will take to pay off the mortgage loan. This will vary depending on if you’re adding extra to the monthly agreed payments.
  • Monthly Payment – The amount needed each month to repay your mortgage on time. To avoid penalties, this should be done by the monthly due date.
  • Total Interest Paid – The precise value of the interest paid over the life of your mortgage.

How to Interpret the Results of the Adjustable Rate Mortgage (ARM) Calculator

The results will be shown in three forms: a bar chart, a detailed table, and an amortization schedule.

  • The Bar Chart of Remaining Loan Balance versus Time shows how each payment decreases your mortgage. To see exactly how much is owed for that month, hover your mouse pointer over a given bar.
  • The Table gives an overview of all the information as a summary. Notice that the table shows the monthly payments with each incremental change, as well as your original inputs. It will also display the total interest paid.
  • The Amortization Schedule breaks down your monthly payment into the principal and interest. It also shows your mortgage balance once payment is received.

Worked Examples

Example 1

You have a $400,000 30-year mortgage loan, with a beginning interest rate of 4% and an ending interest rate of 10%. The assumption is that the loan will increase by 1% a total of 6 times during the 30 years. The first increase will happen after 6 months. Each increase after that will occur every six months until the interest rate is 10%.

Variable Interest Rate Mortgage Calculator

Your results are shown in the table below. For the loan terms described, you will see your initial payment start at $1432.25. By the time your interest rate hits 10%, it would have risen to $2632.71. This is a $1200 increase within the first four years of having the loan. In the end, you would have paid $542,762.37 in total interest costs.


Adjustable Rate Mortgage Calculator


Variable Rate Mortgage Amortization Schedule


Calculate Variable Rate Mortgage Payment


Adjustable Rate Mortgage Payment

Example 2

You decide to investigate a 15-year loan instead. At that time, your bank offers you a beginning and ending interest rate of 3.75% and 9.75%, respectively. You will use the following inputs:

Variable Interest Rate Mortgage 15-Year

Your results would be given below. By decreasing the length of the loan from 30 to 15 years, your monthly payments increased significantly from the first loan. There is a $700 jump in your monthly payments when comparing both loans at the first 6 months. By the end of the fourth year, there is only a $400 difference between the monthly loan payments. The total interest paid on this loan is significantly lower at $206,848.91. This represents approximately $336,000 in savings between the first and the second loan.

Variable Interest Rate Mortgage 15-Year Results


Q and A Adjustable Rate Mortgage

What is an adjustable rate mortgage?

When a mortgage has an interest rate that is not constant, it is an adjustable rate mortgage.  The interest rate is dependent on the fluctuations of a financial index.  When the index changes, so does the interest rate. These mortgages are also called variable rate mortgages.

What kinds of indices would an adjustable rate mortgage be tied to?  It can be

  • the Treasury bill 1-year rate
  • the rate for the cost of funds index for the 11th Federal Home Loan Bank District
  • LIBOR: the London Interbank Offered Rate.

In your mortgage loan agreement, your bank will specify to which rate the loan is tied.  It then adds a margin of a few percentage points to generate the final amount you will pay.

Adjustable Interest Rate Caps

With rates being tied to a fluctuating index, there runs the risk of it growing to an extremely high value. Most adjustable rate mortgages have ceiling caps so to help protect borrowers.  The caps aren’t perfect, and they do have limits as to how much they can help.  Rate caps are usually set pretty high and don’t do much to protect against market unpredictability.

Usually, interest rate caps for variable interest rate mortgages can be assessed at three different stages:

  • Initial cap – which provides the highest rate that can be initially charged on the mortgage;
  • Periodic cap – which determines the maximum value the rate can rise during an adjustment period;
  • Lifetime cap – which provides the maximum rate for the term of the mortgage.

Let’s look at the example below of a 5/1 adjustable rate mortgage that has an initial interest rate of 3.75%.

  • Initial cap = 1.50%. The interest rate can fall within +/- 1.50% of 3.75%.  This means the lowest rate is (3.75 – 1.50)%, or 2.25%; and the highest rate is (3.75 + 1.50)%, or 5.25%.
  • Periodic cap = 2.00%. Let’s say the rate hits the high of 5.25% in the first period.  It can grow to (5.25 + 2.00)%, or 7.25% in the second period.  Similarly, it may drop by 2.00%, to give a rate of 3.25% during this same period.
  • Lifetime cap = 10.00%. The rate may go no higher than 13.75% at any time during the life of the loan.

Which is Better: Fixed Interest Rate or Adjustable Rate Loan?

From an interest standpoint, you’ll pay less interest with an ARM than with a fixed rate loan.  Just remember, past rate performance does not predict the future.  You can’t use the interest rate alone to assume ARMs are better overall.  As a borrower, you must also factor in the loan’s amortization period.  The longer it is, the greater impact changes in interest rates will have on the loan payments.  So variable interest rate mortgages are beneficial for borrowers when the interest rates are decreasing.   However, when interest rates rise, mortgage payments will see a sharp increase.

In terms of adjustable rate mortgages, the most popular is the 5/1 ARM.  The rate remains fixed lower than the typical market rate for the first 5 years of the loan.  After this, it begins adjusting upward each year.

Variable interest rate mortgages are recommended if you plan to sell your home within a few years of purchase.  It’s usually a good suggestion for people who intend to refinance within a few years.  If you plan to keep your home long-term, it’s not the best option because your rates may increase.  Despite the initial low rate, the subsequent adjustments of the ARM’s rate make it higher than a fixed-rate loan.

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