How an adjustable-rate scenario works

The starting rate holds for the fixed period

A 5/1 keeps the rate you enter for five years and can change once a year after that. A 7/1 and a 10/1 wait seven and ten years. Products marked 5/6, 7/6, and 10/6 use the same fixed periods and then change every six months. The initial principal and interest uses the starting rate and the full term.

At each adjustment the remaining balance is reamortized over the months left. The payment can rise or fall. Taxes and insurance, when included, stay at the amounts you entered.

Caps limit a scenario you type

The scenario rate is a figure you type. After the fixed period the model moves toward that figure. The initial cap limits the first change, the periodic cap limits later changes, and the lifetime cap limits how far the rate can rise above the start. The lifetime floor is the lowest rate the scenario will use.

The margin and the index are stored with the scenario so you can record them. They are not added together to produce the rate, and the page does not look up an index. The path is not a forecast.

Compare it with the fixed payment

The ARM calculator also shows the fixed-rate principal and interest for the same price, down payment, starting rate, and term. That fixed figure does not change when you edit the scenario rate or the caps.

A higher scenario rate can raise later payments and total interest in the model. It does not predict what an index will be. Read the methodology page for the cap rules this scenario uses.

Try it in a calculator

Related guides

• How mortgage payments are calculated
• 15-year versus 30-year mortgages
• What affects monthly mortgage costs?

Read the methodology

Written to explain how this site’s calculators work. Not a review by a licensed mortgage professional, and not a recommendation to borrow. These notes are not financial, tax, or legal advice.