How does a 3/1 ARM calculator work?

A 3/1 ARM calculator estimates your monthly mortgage payment during the initial three-year fixed-rate period and projects how payments may change once the loan adjusts annually. It factors in the starting interest rate, loan amount, term, index rate, margin, and any caps that limit how much the rate can increase.

What happens to my payment after the 3-year fixed period ends?

After the initial three-year fixed period, a 3/1 adjustable-rate mortgage adjusts once per year based on the loan’s index and margin. Your payment may increase or decrease depending on market conditions, subject to annual and lifetime rate caps.

3/1 ARM Calculator with Extra Payments & Interest-Only Option

Calculate your adjustable-rate mortgage payments with precision

Our 3/1 ARM calculator helps you forecast adjustable-rate mortgage payments after three years of fixed rates. You can see how extra payments or interest-only options impact your loan balance and long-term interest costs. Adjust each field to match your specific loan terms, and the totals will automatically update. This tool is ideal for planning ahead and understanding potential payment changes.

Basic Loan Information

Loan Amount ($)

Initial Interest Rate (%)

Loan Term (Years)

ARM Adjustment Details

Note: The boxes below are for illustration purposes. You may adjust the values to match your specific loan terms.

Adjustment Frequency after initial fixed period

Note: The calculation boxes below are for illustration purposes. You can edit any field to explore different scenarios, and the totals will automatically update.

Margin + Index = Interest Rate

Margin (%)

Index (%)

Interest Rate (%)

Current Interest Rate + Annual Cap = Interest Rate

Current Interest Rate (%)

Annual Cap (%)

Interest Rate (%)

Lifetime Interest Rate Cap (%)

Annual Rate Cap (%)

Optional Settings

Interest-only payments during initial fixed period

Extra Principal Payment ($/month)

Payment Summary

Initial Monthly Payment

Your fixed payment for the first 3 years

First Adjustment Payment

Year 4 payment (rate + 1%)

Maximum Payment

At lifetime cap (initial rate + 5%)

Total Interest (Worst-Case)

Based on +1% annual increases to cap

Amortization Schedule (Worst-Case Scenario)

Shows rates increasing by 1% annually after year 3, up to the lifetime cap

Year	Rate	Monthly Payment	Principal	Interest	Balance

How to Find the Index Rate Right Now

I know that figuring out the adjustment rate can feel tough, but it doesn’t need to be. The confusion often comes from the index rate, which moves with the market.

The boxes above help you track how your new interest rate is set. They show what changes and what stays steady.

Your rate adjusts after the initial loan term - in this example, three years. At that point, your new interest rate becomes the lower of the fully indexed rate or your current rate plus the annual cap, rounded to the nearest one-eighth of a percent.
Here is the the best source for the index used by Fannie Mae:

1. Federal Reserve Bank of New York (Official Source)
> The Secured Overnight Financing Rate (SOFR) https://www.newyorkfed.org/markets/reference-rates/sofr-averages-and-index
The index rate can be found under the 30-DAY AVERAGE (%). Look for the date on the left. This is the index rate that Fannie Mae uses. As of this writing, the index rate was 4.20185 .

2. Federal Reserve Bank of St. Louis (FRED)
> 1-Year Treasury Constant Maturity Rate: https://fred.stlouisfed.org/series/DGS1
In the top-left corner, under “Observations,” you’ll see the current index rate. This index is used by some lenders.

As of this writing, the index rate was 3.59%. Enter 3.59 in the index box above. Your lender will provide the margin, which is the additional percentage they charge. This margin remains fixed for the life of the loan. Add the index rate and margin together to find your current interest rate.

Understanding the Fannie Mae ARM Index Rate

But what happens if the index rate spikes? That’s where rate caps protect you. For this ARM, the interest rate can increase by no more than 2% per year (every 12 months) until it reaches the lifetime cap of 5%. After entering your numbers, review the worst-case amortization schedule to see how payments could adjust over time.

Ask the lender when the new interest rate is calculated. For example: The lender calculates the new rate at the end of the initial term (e.g., after 3 years for a 3/1 ARM), and the new rate will apply for the next adjustment period.

This calculator is designed to help you clearly understand how an adjustable-rate mortgage works - and to give you the confidence to manage it wisely.