Calculator US9 · When Rates Go Up. The American Debt Handbook
What happens when your adjustable-rate mortgage resets
Put in your loan, your rate caps, the index and the margin. See your payment at each of the next resets if the index stays where it is, or keeps rising.
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This calculator goes with When Rates Go Up. The American Debt Handbook by JP O'Connor. The book explains what the numbers mean and what to do next.
An adjustable-rate mortgage has a fixed rate for its first years, often 5, 7 or 10. After that, the rate resets on a schedule to the index plus a margin. Most ARMs written in recent years use the 30-day average of SOFR, a benchmark that moves closely with the Fed's rate, and many adjust every six months. The margin is fixed in your loan note and never changes.
What the caps do
Caps limit how far the rate can move. A 2/1/5 cap means the first reset can rise at most 2 percentage points, each later reset at most 1, and the rate can never go more than 5 above where it started. If your loan started at 3.25% and the index plus margin is now 6.65%, the caps spread that jump over several resets rather than stopping it.
Why this matters after the September 2026 rise
People who took ARMs in 2021 and 2022 at very low rates are reaching their first resets now, and the index is far higher than when they signed. The Fed's latest projections point to one more rise in 2026. Put 0.25% in the yearly rise box to see a cautious path.
What you can do before the reset
Your servicer has to send you a notice before the first payment change. Use the months before it: pay down principal, compare refinancing to a fixed rate, and check whether your loan can be recast after a lump sum.
Check this one. Your loan note is the only reliable source for your index, margin, caps, rounding and reset dates, and some ARMs have a rate floor. Rounding here is to the nearest 0.125%, which is common but not universal. Your servicer's reset notice shows your actual new rate and payment.
Get the full handbook
United States · 150 pages · JP O'Connor
When Rates Go Up.
The American Debt Handbook
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