ARM Reset Calculator

An Adjustable-Rate Mortgage starts with a fixed initial rate (usually 5, 7, or 10 years), then "resets" to a market-based rate annually. Many 7/1 ARMs originated 2018-2020 at sub-4% are resetting in 2025-2027 at current rates of 6-7% - payment shock of $400-$1,500/month for typical loans. Estimated 1.2M loans affected per Mortgage Bankers Association data.

Three caps limit how much rates can increase: First adjustment cap (typically 5% - rate can't jump more than 5% from start), Periodic cap (typically 2% - each subsequent annual adjustment), Lifetime cap (typically 5% over start rate). A 5/2/5 structure: started at 3% can't exceed 8% over the life of the loan. Caps are your friend in rising-rate environments - without them, ARMs would be uninsurable.

Math depends on current 30-year fixed rate vs your post-reset ARM rate. If 30-yr fixed ≥ ARM rate after caps applied, ride it out - refinancing costs (2-3% of loan) won't pay back. If 30-yr fixed < ARM by 0.5%+, refinance. Also consider: do you plan to stay in the home long enough to recoup closing costs (usually 24-36 months)? If selling soon, neither option matters much.

Yes: (1) Loan recast - pay down principal $5K-$50K, lender re-amortizes payment lower without new closing costs; (2) Loan modification - for distressed borrowers, lender may restructure terms; (3) HELOC + pay down - use HELOC at lower variable rate to pay down ARM principal (risky). Most ARM borrowers in 2026 should be running these numbers BEFORE the reset date hits.