How the 7/1 ARM Calculator Works
We calculate your payment during the 7-year fixed span and simulate annual rate resets using your assumptions: index drift, margin, and caps (initial, periodic, lifetime). Then we produce a projected payment after the first reset and a full amortization view.
Note: Results are estimates for education and planning; lender calculations may differ.
What Is a 7/1 ARM?
A 7/1 ARM has a fixed rate for 7 years, then adjusts annually. The initial rate is often lower than a 30-year fixed, which can reduce early-year payments for buyers who may sell, move, or refinance before the first adjustment.
7/1 ARM Index, Margin, and Caps Explained
After the fixed period, your new rate generally equals an index plus a margin. Caps limit how much rates can change: an initial cap (first reset), periodic cap (each subsequent year), and lifetime cap (maximum above the initial rate).
Pros and Cons of a 7/1 ARM
- Pros: lower initial rate, lower early payments, potential savings if you move/refi before reset.
- Cons: payment uncertainty after year 7, exposure to rising rates.
Is a 7/1 ARM Right for You?
A good fit if you expect to relocate, sell, or refinance within 7–9 years and value a lower initial payment. If you want rate/payment certainty for decades, a fixed mortgage may be better.
7/1 ARM vs. 5/1 ARM vs. 10/1 ARM
5/1 ARMs usually offer lower initial rates but reset sooner; 10/1 ARMs offer a longer fixed span but may start higher. Choose based on your time horizon and risk tolerance.
Inputs for the Calculator
- Home price, down payment (amount or %), loan term
- Initial interest rate (7-year fixed) and ARM caps
- Assumed index path (increase/decrease), margin (informational), taxes/insurance/HOA
Understanding Your Results
See your initial monthly payment, projected post-adjustment payment, total interest, and amortization schedule. Use the charts to visualize costs and balance over time.
Frequently Asked Questions
How are ARM payments recalculated?
After each annual reset, the payment is recomputed based on the new rate, remaining balance, and remaining term.
Can I refinance before the first reset?
Yes—many borrowers refinance or move before year 7, which can make the ARM’s lower initial payments attractive.