How adjustable-rate mortgages work
An ARM such as a 5/1 or 7/1 carries a fixed introductory rate for the first 5 or 7 years, then adjusts periodically based on a market index plus a margin. The introductory rate is usually lower than a comparable 30-year fixed rate, which can make the early payments more affordable. This calculator estimates the payment during the initial fixed period.
Weighing the risk of an ARM
After the introductory period, your rate — and payment — can rise (subject to periodic and lifetime caps). ARMs tend to make sense if you expect to sell or refinance before the first adjustment, or if you anticipate rates falling. If you plan to stay long term, model a higher rate here to stress-test what your payment could become.