Adjustable Rate Mortgage Calculator Overview

There are two main types of adjustable rate mortgages (ARMs). There are fixed-to-adjustable rate mortgages and straight adjustable rate mortgages. Fixed to adjustable rate mortgages have a period of time (usually 5-, 7-, or 10-year periods) where the interest rate is fixed. After this fixed rate period the interest rate becomes an adjustable rate, usually adjusting every year thereafter. A straight adjustable rate mortgage usually adjusts on a monthly or a bi-annual basis. Adjustable rate mortgages can provide attractive interest rates, but your payment is not fixed for the entire term of the mortgage. Typically, an adjustable rate mortgage has an interest rate that is lower than a fixed rate mortgage. Depending on how often the interest rate adjusts and what interest rates are expected to do (go up or go down), ARMs can cost a borrower a lot less in the long-run. 

Since ARMs typically have lower interest rates, it is important to consider how long you will be in the home or how long you will have the mortgage. You also need to consider your ability to deal with possible adjustments in your monthly mortgage payment.