💰 Adjustable Rate Mortgage (ARM) Calculator
This calculator helps you understand the complex payment structure of an Adjustable Rate Mortgage (ARM). Enter your loan details, including the initial fixed rate period and rate caps, to see how your monthly payments and total interest will evolve over the life of the loan. Knowing your potential adjustments is key to smart financial planning.
📈 Calculation Summary
Monthly Payment Evolution
Principal vs. Interest Distribution
Detailed Amortization Schedule (Key Periods)
| Month/Year | Payment | Interest Paid | Principal Paid | Remaining Principal |
|---|
In-Depth Guide to Adjustable Rate Mortgages (ARM)
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How to Use the ARM Calculator
Enter the Loan Amount, the Initial Interest Rate (e.g., 4.5), the Initial Fixed Period (e.g., 5 for a 5/1 ARM), the Total Loan Term (e.g., 30), the Adjustment Frequency (e.g., 1 for annual adjustment after the fixed period), the Index + Margin (an estimate for future rates), and the Periodic and Lifetime Rate Caps.
Understanding the ARM Calculation Formula
The core monthly payment (M) calculation uses the standard amortization formula:
$$M = P \frac{i (1 + i)^n}{(1 + i)^n - 1}$$Where $P$ is the remaining principal, $i$ is the monthly interest rate ($\text{Annual Rate} / 1200$), and $n$ is the number of remaining months. The complexity in ARM lies in adjusting $i$ at each adjustment interval, ensuring it does not exceed the $\text{Periodic Cap}$ or the $\text{Lifetime Cap}$.
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