Adjustable Rate Mortgage Calculator

Payment schedules with interest rate changes on any date


Speaking broadly, a mortgage may be one of two types - a fixed rate mortgage or an adjustable rate mortgage (ARM). The word "rate" of course is referring to the loan's interest rate.

With a fixed rate mortgage, the interest rate does not change over the term of the loan. But with an adjustable rate mortgage (sometimes called a variable rate mortgage) the interest rate is subject to change. Twenty of thirty years ago, when interest rates were much higher AND trending down, ARMs were popular. People were taking out adjustable rate mortgages expecting that in two or so years, the interest rate would reset lower - thus saving interest charges.

Today, in a higher interest rate environment, ARMs have become more popular than they were even a few years ago. (Borrowers are seeking ways to reduce their periodic payments.) And some lenders issued loans fifteen or twenty years ago that are near maturity for which the borrower might require an audited statement.

If you fall into either group, you'll find that the below adjustable rate mortgage calculator is very flexible, and is capable of creating an ARM payment schedule for virtually any adjustable rate loan. More below

Can an adjustable-rate mortgage (ARM) save me money?

Yes. Since the mortgage issuer can raise the loan's interest rate, they do not bear the risk of continuing losses in a rising interest rate environment. Therefore, they can offer you initially a lower interest rate than might be available if you take out a fixed-rate mortgage.

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Recent changes and enhancements

  • Jan. 10, 2024: Changed the default long and short-period interest options under "Settings." This means you will not get the same results you previously had unless you reselect your preferred setting.
  • 2023: Save any schedule's data to Word/docx or Excel/xlsx files. Click on "Schedule" then "Continue" past the title page.
  • The calculator automatically sorts the cash flow prior to file save and calculation. This fixes the issue where the "Unknown" did not calculate due to overlapping dates in different cash flow series unless the user had clicked the "Expand" button.

Step-by-Step Tutorial
Tutorial 4 - How to calculate an adjustable rate mortgage.

All users should work through the more detailed first tutorial to understand the ARM Calculator's basic concepts and settings.

How do I create a loan schedule with adjustable interest rates? Follow these steps:

  1. Set "Schedule Type" to "Loan"
    • Or click the [New] button to clear any previous entries.
  2. Set "Rounding" to "Adjust last interest" by clicking on the {Settings} {Rounding Options}
  3. In the header section, make the following settings:
    1. For "Calculate Method" select "Normal".
    2. Set "Initial Compounding" to "Monthly".
    3. Enter 5.5 for the "Initial Interest Rate".
  1. In row one of the cash flow input area, create a "Loan" series
    1. Set the "Date" to June 25
    2. Set the "Amount" to 250,000.00
    3. Set the "# Periods" to 1
      • Note: Since there is one loan, you will not be able to set a frequency. (The calculator will clear it when you leave the row.)
  1. Move to the second row of the cash flow input area. Select "Payment" for the "Series" type. For this example, we will assume we want to create a schedule for a 15-year mortgage (180 monthly payments), which has a provision that the nominal annual interest rate can be adjusted every five years.
    1. Set the "Date" to July 25
    2. Set the "Amount" to "Unknown" by typing "U". Fig. 1
    3. Set the "# Periods" to 180. The result is a payment amount assuming a 15-year term using the initial 5.5% interest rate.
    4. Use the [Tab] key to tab to Frequency. Select "Monthly".
    5. The "End Date" will automatically be calculated (June 25, 2038). 180 monthly periods is 15 years
  • Your calculator should now look like this:
Adjustable rate mortgage setup
Fig. 1 initial setup for adjustable rate mortgage
  1. Calculate the unknown. The result is $2,042.71. Fig. 2
Adjustable rate mortgage setup
Fig. 2 Initial regular payment amount
  1. Make the first interest rate change
    1. In row 2, change the "# Periods" of payments from 180 to 60. We have now set the calculator for five years of payments at an initial interest rate of 5.5%.
    2. Move to the third row of the cash flow input area. Select "Rate Change" for the "Series".
    3. Set "Date" to June 25, 2028
    4. Enter "4.875" for the new nominal annual interest rate. Fig. 3
    5. You could change the compounding option by clicking on "Change Compounding" in the "Series Options" column, but we'll leave it set to "Daily"
  1. Calculate the new payment. Move to the fourth row of the cash flow input area.
    1. Select "Payment" for the "Series"
    2. Set the "Date" to July 25, 2028
    3. Set the "Amount" to "Unknown". Fig. 3
    4. Set the "# Periods" to 120. We set this to 120 because after the 60 payments there are 120 remaining scheduled payments
Interest rate change
Fig. 3 First interest rate change & ready to calculate the new payment amount
  1. Calculate the unknown. The result is $1,984.91. The new payment decreased due to the interest rate reduction. Fig. 4
New payment
Fig. 4 New payment after the rate change
  1. Prepare for the next rate change:
    1. In the 4th row, change the "# Periods" of payment from 120 to 60
    2. Move to the 5th row. Select "Rate Change" for the "Series"
    3. Set the date to June 25, 2033
    4. Enter "5.75" in the amount column for the new nominal annual interest rate. Fig. 5
  1. Click on the sixth row of the cash flow input area. Select "Payment" for the "Event" type.
    1. Set the "Date" to July 25, 2033
    2. Set the "Amount" to "Unknown"
    3. Set the "# Periods" to 60 since after the previous 120 payments there are 60 remaining scheduled payments
2nd rate adjustment
Fig. 5 Second interest rate adjustment
  1. Calculate the unknown. The result is $2,027.40. The new payment amount increased due to the increase in the interest rate. Fig. 6
Payment change
Fig. 6 New payment after rate change
  1. If you want to see a detailed schedule of payments showing the monthly payment allocated between principal and interest, click on the "Schedule" button above the input area.
  • Below shows the "Schedule" with one of the interest rate changes. Fig. 7
ARM mortgage schedule
Fig. 7 ARM schedule showing rate change & new payment amount

Summary: For adjustable rate mortgages & loans, the principal to follow is to calculate the payment amount for the number of ALL unknown remaining payments. After you have calculated the unknown payment amount, set the "# Periods" column to the number of payments the borrower will make at the new interest rate. Move to the next row and set up a new rate change. Then move to the next row and enter a new payment series with the amount unknown and the number of payments set to the total number of scheduled remaining payments. Again, calculate the unknown. Repeat until you have set up all payment series.

There are dozens of financial calculators on this web site. Some may be quicker to use, but except for the Ultimate Financial Calculator, none besides this adjustable rate mortgage calculator allow you to create an amortization schedule where the interest rate change can occur on a date other than a payment due date.

4 Comments on “Adjustable Rate Mortgage Calculator”

Join the conversation. Tell me what you think.
  • Lori Murray says:

    how can I accrue interest so that after 3 months of missed payments – the principal is not added to and when payments resume – payments go to accrued interest?

    • If you want to have the accrued interest added to the balance, enter a 0 payment row with the date you want the interest accrued through.

      If the accrued interest is not being added to the balance, then set the loan to use "U.S. Rule." under "Calculate Method".

  • Erica Osborne says:

    Can you help with these terms:

    $600,000.00. Amortized over 15 years. due in 7.
    First year of payments will be interest only.
    Years 2-6 will be standard payments and the 7year is balloon.

    • That’s a pretty broad question. Did you see these tutorials. There are 2 about balloon payments and one about loans with initial interest-only loan payments.

      Please go through the tutorials and if you have a specific question, I’ll be happy to answer that. But to answer your question would mean that I just copy the contents of those tutorials here.

      To get you started, as I understand it, you’ll set up the calculation with 4 rows. The first row is the loan amount. The 2nd row is the initial interest-only payments. The third row is for the standard payments, and the final row will be the balloon payment.

      If you know neither the regular loan payment amount or how much the balloon payment will be, you’ll need to do 2 calculations. The balloon payment tutorials will step you through them.

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