Adjustable-Rate Mortgage Calculator
Calculate your adjustable-rate mortgage payment
This adjustable-rate mortgage (ARM) calculator will show you your monthly payment for an ARM loan based on your loan amount, loan terms, and interest rate. In the early years of your mortgage, rates on an ARM are normally fixed for a period of time, then typically fluctuate with market rates.
How to calculate your ARM loan payment
Begin by entering the price of the home you’re purchasing and the amount you’ll be providing as a down payment – you can enter the down payment either as a dollar figure or as a percentage of the price. Next, select the loan term – the number of years you will have to repay your mortgage loan. You can adjust these figures to see how they will affect your monthly payments.
Since this is an adjustable-rate mortgage calculator, you’ll need to enter three important figures:
- Your initial mortgage interest rate
- How many years will pass before the first annual adjustment
- The annual adjustment rate
Property taxes and homeowners insurance will also contribute to your monthly mortgage payments – providing your ZIP code will help calculate these, or you can add them manually if you know them. Additionally, if the home requires you to be part of a homeowners association (HOA), those monthly fees may also be incorporated into your mortgage payments.
How adjustable-rate mortgages work
Adjustable-rate mortgages (ARMs) typically offer homebuyers the advantage of a lower mortgage payment during the initial period of the loan. ARMs are generally offered on a 1-, 3-, 5-, 7- or 10-year basis. Once the initial period expires, the mortgage rate will reset at then-current interest rate levels. Depending on the direction interest rates have taken, these resets can result in higher or lower monthly payments.
Advantages of an ARM can include lower initial interest rates and the potential for a lower payment if interest rates fall in the future.
What costs are included in a mortgage payment
When you make a monthly mortgage payment, your money goes toward:
- Principal balance – This is the amount remaining on your original loan amount, not including interest or other charges.
- Interest – The fee you are paying to borrow the money, paid as a percentage of your principal balance.
- Property tax – One month’s worth of your annual property tax is put in a mortgage escrow account, from which your lender pays property taxes when they are due each year.
- Homeowners insurance – As with your property taxes, one month’s worth of your annual premium is kept in escrow and paid by the lender annually.
Additionally, if your mortgage requires private mortgage insurance (PMI), or if your property is part of a homeowners association (HOA) with annual fees, these costs may also be wrapped into your monthly payment.
Deciding how much you can afford
When you’re buying a home, it’s important to consider your overall budget and expenses when you’re planning your mortgage payment. Before committing, it is essential to take into account all your current expenses and current total monthly debt, including credit card payments and student loan expenses.
How much of your net income is currently dedicated to these expenses, and how much do you have left over once these expenses are accounted for? Answering these questions will help you determine a potential amount of money you could comfortably spend for your monthly payment.
How you can lower your monthly mortgage payments
It’s important to feel confident that you can comfortably fit your home’s monthly mortgage into your budget. As you navigate the buying process – or even during your homeownership – if you find yourself in a spot where the payment feels a little on the high side, we can suggest a few ways to lower your monthly payments:
- While shopping for a home, be clear about what you want and need in a home, and don’t feel pressured to invest in a house that will strain your finances. See whether you can afford a larger down payment, or consider a longer-term mortgage.
- Buying mortgage points when you buy your home is also a popular way to lower your interest rate and monthly payments, and can make sense if you plan to stay in your home over the long term. Basically, you’re incurring an upfront cost to reduce the amount due, whether it’s through a lower interest rate or reduced mortgage processing costs.
- If you’re currently a homeowner, you may be able to refinance your home with a new loan that has more favorable terms, such as lower monthly payments. There are many different refinancing options available today, and our team is happy to help you learn more.
Mortgage terms to keep in mind
- Adjustment date: The date that the interest rate changes on an adjustable-rate mortgage.
- Adjustment period: The period elapsing between adjustment dates for an adjustable-rate mortgage.
- Loan term: The amount of time used to calculate the monthly mortgage payments.
- Initial interest rate: This refers to the original interest rate of the mortgage at the time of closing; it runs through an agreed-upon number of months known as the initial rate period. This rate changes for an adjustable-rate mortgage.
Looking for another term put in plain language? Visit the complete CrossCountry Mortgage Glossary.
Additional mortgage calculators
Buying or refinancing a home can be confusing – we want to make beginning the journey as simple as possible. We’ve developed easy-to-use tools that will help you compare your options, calculate your payment, see how much mortgage you can afford, understand your debt-to-income ratio, and discover answers to many of your homebuying questions.
Use our free, interactive calculators to start getting answers and take the next financial steps toward your goals:
