Forecast payment jumps when adjustable rate periods end. Test caps, indexes, and margins using scenarios. See shock size, new rate, and next payments clearly.
| Loan | Term | Initial | Index | Margin | First cap | New rate | Shock |
|---|---|---|---|---|---|---|---|
| $350,000 | 30y | 4.250% | 3.200% | 2.250% | ±2.000% | 6.250% | Moderate |
| $275,000 | 30y | 3.750% | 4.000% | 2.250% | ±2.000% | 5.750% | High |
| $500,000 | 30y | 4.900% | 2.700% | 2.250% | ±2.000% | 4.950% | Low |
| $200,000 | 15y | 5.000% | 4.500% | 2.250% | ±2.000% | 7.000% | Very high |
The monthly payment is computed with the standard amortization payment equation:
Payment shock is the jump in monthly cost when the rate resets. For example, a $350,000 balance at 4.250% over 30 years can start near $1,721 monthly. If the reset rate reaches 6.250% after a 5-year fixed period, the recalculated payment rises because the remaining term is shorter. The calculator reports both dollar and percent change.
The reset payment depends on the remaining balance, remaining months, and the capped reset rate. Balance is estimated by amortizing the fixed-period payment for the fixed months. The reset rate begins as Index + Margin, such as 3.200% + 2.250% = 5.450%. If caps allow a higher move, the new rate may climb further, increasing payment materially.
Caps limit how fast rates change. A first cap of ±2.000% restricts the first reset to a band around the initial rate. Periodic caps constrain each later adjustment by the same step size. Lifetime caps limit the maximum rate above the initial rate, while a floor prevents rates from dropping below a minimum. These controls can reduce extreme swings.
The schedule section stress tests multiple adjustments. Choose an adjustment frequency, like 12 months, and an index change per adjustment, like +0.250%. Each step amortizes the loan using the current payment, then recalculates payment using the new capped rate and the remaining term. This converts uncertain rate paths into a clear sequence of potential payments.
Use the shock amount to test affordability against income and savings goals. A $350 increase may require trimming discretionary spending or boosting reserves. Compare scenarios with flat, rising, and falling index assumptions to see best and worst cases. If the lifetime cap produces an unaffordable payment, consider refinancing earlier, shortening the fixed period risk window, or paying extra principal. For many households, planning for a 10% to 25% increase is a prudent cushion when markets shift unexpectedly quickly.
It is the difference between your initial monthly payment and the new payment after the first rate reset, shown as both a dollar change and a percent change.
Use the index your lender references at reset, such as the value published for that month. If you are unsure, run multiple index values to see a reasonable range.
The first cap limits how far the first reset can move from the initial rate. Periodic caps limit each later change. Lifetime caps limit the maximum increase over the initial rate.
After the fixed period, fewer months remain. Even a modest rate increase can raise payment because the remaining balance must amortize over a shorter schedule.
It is your assumption for how the index moves at each adjustment date. Set it to zero for a flat path, positive for rising markets, or negative for declines.
No. It estimates principal-and-interest payments only. If you escrow taxes or insurance, add those monthly amounts to both the initial and reset payments for a full budget view.
Important Note: All the Calculators listed in this site are for educational purpose only and we do not guarentee the accuracy of results. Please do consult with other sources as well.