Calculator
Formula used
For each rate period, the required monthly principal-and-interest payment is recalculated from the remaining balance, the current annual rate, and the months left in the term:
- Monthly rate: r = (annualRate ÷ 100) ÷ 12
- Payment: P = B × r ÷ (1 − (1 + r)−n)
- Where B is remaining balance and n is remaining months.
At each reset, the projected rate starts from index + margin, then applies the floor, the periodic cap (change per reset), and the lifetime cap (max increase over the initial rate). Escrow estimates (tax, insurance, PMI) are added to show an all-in monthly total.
How to use this calculator
- Enter the loan amount, term, and starting rate.
- Set the initial fixed period and the reset frequency.
- Choose an index projection method and provide index values.
- Enter margin and caps to match your loan’s disclosure.
- Optional: add interest-only months, extra principal, and escrow estimates.
- Click Calculate to see results above the form and export files.
Example data table
| Scenario | Loan | Term | Initial / Fixed | Index + Margin | Caps / Floor | Initial P&I | First reset rate | First reset P&I |
|---|---|---|---|---|---|---|---|---|
| Sample | $300,000 | 30 years | 5.50% / 5 years | 3.00% + 2.25% | 2% periodic, 5% lifetime, 2.75% floor | $1,703.37 | 5.25% | $1,620.93 |
Values above are illustrative and depend on the forecast settings.
Payment Structure Across Periods
An adjustable-rate loan behaves like a series of mini-loans. Each reset recalculates the required principal-and-interest payment using the remaining balance and remaining months. In the sample table, a $300,000 balance at 5.50% on a 30-year term produces about $1,703 per month for principal and interest. After the fixed period ends, the payment changes when the rate changes. This view helps compare future payment shock risks.
Rate Reset Sensitivity
The most important driver is the fully indexed rate: index plus margin. If the index is 3.00% and the margin is 2.25%, the starting reset target is 5.25%. A higher index path can raise payments quickly because the payment is re-amortized over fewer months. For example, moving from 5.50% to 7.50% can add several hundred dollars per month on a typical balance.
Cap And Floor Effects
Caps and floors smooth extreme scenarios. A 2.00% periodic cap limits how much the rate can change at each reset, while a 5.00% lifetime cap limits the total increase above the initial rate. A floor such as 2.75% prevents the rate from dropping below a minimum. These constraints often matter more than the index forecast when rates are volatile.
Cash Flow With Escrow
Borrowers usually budget the all-in payment, not just principal and interest. The calculator adds estimated property tax, insurance, and optional PMI to show a practical monthly outflow. For instance, $3,600 annual tax adds $300 per month, and $1,200 insurance adds $100, turning a $1,703 P&I payment into roughly $2,103 before PMI.
Strategy Using Extra Principal
Even modest extra principal reduces balance faster, which lowers interest at every future rate. It can also shorten the loan term, reducing the number of resets you experience. If you can add $100 to $300 monthly, compare payoff date, total interest, and the maximum projected payment to judge risk and affordability.
FAQs
What is the fully indexed rate?
It is the projected reset rate calculated as index plus margin, then limited by the floor, periodic cap, and lifetime cap. Lenders disclose the exact index, margin, and cap structure in your note and ARM booklet.
Why can my payment jump at a reset?
After a reset, the payment is re-amortized over the remaining months at the new rate. If the rate rises and the term remaining is shorter, the required payment can increase sharply, even if the balance has declined.
How do periodic and lifetime caps work?
A periodic cap limits the rate change at each adjustment, such as ±2.00%. A lifetime cap limits the total increase above the initial rate, such as +5.00%. Caps reduce extreme outcomes, but they do not eliminate payment risk.
When should I use a custom index list?
Use it when you want to test specific scenarios, like a step-up path or a flat outlook. Enter one index value per adjustment. If the list is shorter than the loan term, the calculator repeats the last value.
How do interest-only months affect results?
During interest-only months, you pay interest but no scheduled principal, so the balance stays higher. When principal payments begin, the remaining balance must amortize over fewer months, which usually increases the required payment.
Do taxes and insurance change the loan payment?
They do not change principal and interest, but they change your monthly cash flow. Enter your best estimates to see a practical all-in payment. Your escrow amounts can change annually based on bills and lender requirements.