APR Calculator for Adjustable-Rate Mortgages (ARMs)

Represented as a percentage, a mortgage’s annual percentage rate (APR) represents the cost of borrowing in a given year, including the interest rate and other fees. In an adjustable-rate mortgage (ARM), the APR can significantly vary over time due to changes in the interest rate. 

The APR calculator for ARMs can assess the long-term costs of an ARM and project any changes, helping borrowers select the ARM rates that are right for them.

Using The APR Calculator for ARMs

First, input the loan information into the first section. This can be actual amounts provided by a lender, or just test data to see what you can afford.

Next, select when the loan will receive adjustments. Staying true to their name, every ARM receives rate adjustments several times over the course of the loan. If you’re looking for realistic examples of adjustment criteria, you can check with your intended lender to see what they offer.

You can also input any closing costs and fees you intend to pay when buying the home. Paying for points or incurring a higher origination fee increases your closing costs,  but saves you in the long-term. Since these costs are included in the calculation of the APR, the more you pay in points and fees, the higher the APR becomes.

Using that information, the APR calculator for ARMs will display the total cost of the mortgage, including a visualization of the interest and principal. It will also visualize the changes in interest amounts by year. Finally, by clicking “View Report” at the top of the calculator, you can see a detailed breakdown of information related to the loan, including a payment schedule by year. 

How Often Does an ARM Loan Change?

ARMs are characterized by two numbers, which indicate the initial fixed period and the adjustment interval after that period. For example, a 7/1 ARM means the interest rate stays fixed for seven years before adjusting annually. ARMs can come in 3/1, 5/1, or even 10/1 adjustment intervals.

ARMs also typically have rate caps that limit how much the interest rate can change during each adjustment period and over the life of the loan, providing some protection against dramatic increases in interest rates and monthly payments.

Frequently Asked Questions About Calculating APR for ARMs

How Do I Calculate APR on a Mortgage?

To calculate your APR on a mortgage, you can use our mortgage APR calculator. Enter the loan amount, the term in years, interest rate, and select the option for amortization if needed. Fill in other parts of closing costs, and your APR will be displayed immediately.

What Is a Good APR for a Mortgage?

There is no absolute ideal APR for every borrower, but the right one for you depends on what you’re looking for. A “good” APR for a mortgage typically falls below the current average mortgage rates, which can vary depending on market conditions, your credit score, down payment, loan term and the type of loan (fixed or adjustable). You can view current APRs on our compare current mortgage rates page.


When comparing mortgage APRs to other loan types, such as credit cards, student loans or personal loans, it’s clear that mortgages typically offer lower APRs. Mortgage APRs are often lower than those for other types of loans due to the loan being secured by the property itself, reducing the lender’s risk. The other loans are usually unsecured, meaning there is no collateral backing the loan, which increases the lender’s risk.

Is the APR Higher on an ARM?

It depends. Initially, ARMs often start with a lower interest rate and APR. However, ARM’s have the potential to increase their interest rates after the initial fixed period, which in turn would increase the APR. Borrowers must keep this possibility of a future change in mind when comparing the APRs of ARMs and fixed-rate mortgages.

What Fees Affect the APR on a Mortgage Loan?

Your mortgage loan APR includes fees like closing costs, discount points, origination fees, and other such fees that are added as part of the loan. A change in any of these will affect your APR.

Can You Refinance Out of an ARM?

Yes, you can refinance out of an ARM into another type of mortgage, such as a fixed-rate mortgage. Borrowers often choose to refinance out of an ARM to secure a fixed interest rate when interest rates are low or if the borrower wants to avoid potential rate increases with the ARM. 


However, before refinancing, it’s important to consider the associated costs you could incur, such as closing costs. Evaluate how long you plan to stay in the home to ensure that the benefits of refinancing outweigh the expense.

What is The Penalty for Refinancing an ARM?

The penalty for refinancing an ARM can vary depending on the terms of your original loan agreement. Some ARMs include prepayment penalties, which are fees charged by the lender if you pay off your loan early, including through refinancing. However, not all ARMs have these penalties, and the specifics can vary widely.


Before you refinance, make sure you review your loan agreement, consider the costs and consult with your lender. Additionally, research your state’s laws, as some jurisdictions have restrictions on prepayment penalties, including limits on the amounts and the time frames during which they can be applied.

What is a Fully Amortizing ARM?

ARMs that are fully amortizing have a maximum interest rate that they cannot exceed. They are different from standard ARMs, where the rate is fully adjustable according to the index rate at the time.