5/1 ARM mortgage calculator
The teaser rate gets all the marketing. The reset gets the fine print. We model the question that actually matters: what does your monthly payment look like the year your rate resets? Three scenarios shown side-by-side — flat / your expectation / lifetime cap — plus the break-even reset rate at which the ARM beats a 30-year fixed.
Last updated 2026-05-13
- 30-yr fixed @ 6.50%
- $510,178
- ARM, rates stay flat
- $417,616
- ARM, your expectation
- $520,460
- ARM, lifetime cap
- $783,865
MethodologyHow ARMs work, and what we deliberately don't model
How ARMs work, and what we deliberately don't model
What 5/1 means:rate is fixed for 5 years, then resets annually (the "/1") based on an index (typically SOFR) plus a margin written into the note (typically 2.75%). 7/1 and 10/1 work the same way with longer initial fixed periods — toggle in the calculator above.
The three caps you sign for: initial cap (max change at first reset, typically 2pp), periodic cap (max change at each subsequent reset, typically 2pp), and lifetime cap (max change over initial, typically 5pp). The lifetime cap defines the worst-case scenario shown above. Read your loan estimate carefully — these numbers are negotiable in some markets.
Why we model "reset rate stays flat":a real 5/1 ARM resets every year for 25 years after the teaser period. Modeling each annual reset would require a forecast of SOFR for the next 30 years, which nobody can produce honestly. Instead, we treat the user's expected reset rate as the rate that takes effect at month 61 and stays through month 360. This gives a reasonable middle scenario between the flat-rate best case and the lifetime-cap worst case.
Payment shock is the headline:for a $400k loan moving from a 5.5% teaser to a 7% reset, the payment goes from $2,271 to ~$2,615 — a $344/mo (15%) increase. At the lifetime cap of 10.5%, it's ~$3,500 — a $1,229/mo (54%) increase. Whether you can absorb that depends on career trajectory, savings cushion, and whether you can sell or refinance before reset.
Break-even reset rate:the rate at which the ARM's total interest over 30 years equals the fixed-rate equivalent. If you think rates will stay below that line, ARM wins; above, fixed wins. This is the cleanest way to convert the uncertainty into a single threshold you can reason about.
When ARMs make sense:(1) confident you'll sell or refinance before the fixed period ends (typical home tenure is 7-13 years), (2) significant salary growth expected, (3) ARM teaser is 0.75pp+ below the fixed rate (under that the savings barely cover closing-cost refinancing if you need to escape).
When ARMs are a trap: (1) buying at the top of your affordability range — you have no shock cushion, (2) plan to keep the house indefinitely, (3) rates are already historically low when you sign (limited upside, large downside risk).
Conforming vs non-conforming ARMs:FRM-conforming ARMs (most under jumbo limit) follow the 2/2/5 cap pattern. Jumbo and portfolio-lender ARMs can have larger caps, no caps, or unusual reset indexes — always read the note. Hybrid options like interest-only ARMs or option ARMs amplify all the risks here and aren't modeled.