ARM Calculator
See how an adjustable-rate mortgage (ARM) could change over time — the fixed intro payment, the estimated payment at the first adjustment (index + margin, held within your caps), and the worst-case payment at the lifetime cap. Educational only, never a quote.
Illustrative rate used: 6.875% (a conservative national average, not a quote). Estimates only, using an illustrative interest rate and tax and insurance data for your selected state (county-level where county data is available). Not a quote, offer, or commitment to lend. Verify every figure with a licensed lender in your state before relying on it.
How an adjustable-rate mortgage (ARM) works
An ARM carries a fixed rate for an intro period — five, seven, or ten years — and then the rate adjusts on a set schedule (every six months on a modern “/6” ARM). A 5/6 ARM is fixed for five years, then adjusts every six months; 7/6 and 10/6 work the same way with longer fixed periods.
At each adjustment the new rate is built from two parts: a moving market index (new loans use the 30-day Average SOFR) plus a fixed margin your lender set at closing. Index + margin, rounded to the nearest one-eighth of a percent, is the fully-indexed rate. Rate caps limit how far the rate can move: an initial cap at the first adjustment, a periodic cap at each one after, and a lifetime cap that sets the highest rate you could ever pay.
ARMs can save money if you are confident you’ll sell or refinance before the fixed period ends — the intro rate is often lower than a comparable fixed loan. The risk is the flip side: keep the loan and, if rates rise, the payment can climb meaningfully, up to that lifetime-cap ceiling. No one can predict where the index will be years from now, so weigh the worst case, not just the intro payment. The federal CFPB CHARM booklet (consumerfinance.gov) is the plain-language guide, and your own loan note and Loan Estimate list the exact index, margin, caps, and schedule that apply to you.
Frequently asked questions
What does 5/6, 7/6, or 10/6 mean on an ARM?
The first number is how many years the rate stays fixed; the “/6” means it then adjusts every six months. So a 5/6 ARM is fixed for five years, then adjusts twice a year for the rest of the term. Older ARMs written “5/1” adjusted once a year instead.
How is the rate set after the fixed period?
The new rate equals a market index (new loans use the 30-day Average SOFR) plus a fixed margin your lender set at closing, rounded to the nearest one-eighth of a percent — the “fully-indexed rate.” Rate caps then limit how far it can move at the first adjustment, at each later adjustment, and over the life of the loan.
How high could my payment go?
The worst case uses your lifetime cap: the highest rate you could ever pay is your start rate plus the lifetime cap (for example, a 6.25% start with a 5% lifetime cap tops out at 11.25%). This calculator shows that maximum payment so you can weigh the risk, not just the low intro payment. The index is unpredictable, so the actual future payment will land somewhere between the intro and the cap.
Is this a rate quote?
No. It is an educational illustration using an illustrative index value and example margin and caps. Your real index, margin, caps, rounding, and schedule come from your loan note and Loan Estimate. HomeWise does not lend, broker, or set these terms.