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.

Use the full interactive calculator below, or

Related Calculators

Monthly Mortgage Payment

Finance & Accounting

Refinance Break-Even

Finance & Accounting

15 vs 30 Year Mortgage

Finance & Accounting

ARM Rate Adjustment Impact Calculator

Related Calculators

Frequently Asked Questions

How do ARM caps work?

When does an ARM make sense?

What is the current ARM index?