How do ARM caps work?

ARMs have three caps: initial (e.g., 2%), periodic (2%), and lifetime (5%). A 5/1 ARM at 5% with 2/2/5 caps: can adjust to max 7% at first adjustment, then 9% at each subsequent, never above 10% lifetime.

When does an ARM make sense?

If you plan to sell or refinance before the fixed period ends, or if rates are expected to fall. A 5/1 ARM typically offers 0.5-1% lower initial rate than a 30-year fixed, saving $100-$200/month initially.

What is the current ARM index?

Most ARMs are tied to SOFR (Secured Overnight Financing Rate), which replaced LIBOR. At adjustment, your rate = SOFR index + your margin (typically 2.5-3.5%).

ARM Rate Adjustment Impact Calculator

Calculate the worst-case payment increase when an adjustable-rate mortgage adjusts. Applies periodic and lifetime caps to the current index rate plus margin.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Calculate the worst-case payment increase when an adjustable-rate mortgage adjusts. Applies periodic and lifetime caps to the current index rate plus margin. Use the arm adjustment result to inform your calculation.

Related Calculators

Monthly Mortgage Payment

Finance & Accounting

Refinance Break-Even

Finance & Accounting

15 vs 30 Year Mortgage

Finance & Accounting

ARM Rate Adjustment Impact Calculator

How to Use

Related Calculators

Frequently Asked Questions

How do ARM caps work?

When does an ARM make sense?

What is the current ARM index?