An adjustable-rate mortgage (ARM) starts with a lower fixed rate for an intro period — 5, 7, or 10 years — then adjusts periodically with the market. ARMs can save money if you'll move or refinance before the adjustment, but carry the risk of higher payments later.
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| Year | Principal paid | Interest paid | Ending balance |
|---|---|---|---|
| 1 | $3,764 | $24,543 | $356,236 |
| 2 | $4,030 | $24,277 | $352,206 |
| 3 | $4,315 | $23,992 | $347,891 |
| 4 | $4,620 | $23,687 | $343,272 |
| 5 | $4,946 | $23,361 | $338,325 |
| 6 | $5,296 | $23,011 | $333,029 |
| 7 | $5,671 | $22,637 | $327,358 |
| 8 | $6,071 | $22,236 | $321,287 |
| 9 | $6,501 | $21,807 | $314,787 |
| 10 | $6,960 | $21,347 | $307,826 |
| 11 | $7,452 | $20,855 | $300,374 |
| 12 | $7,979 | $20,328 | $292,395 |
| 13 | $8,543 | $19,764 | $283,852 |
| 14 | $9,147 | $19,160 | $274,705 |
| 15 | $9,794 | $18,514 | $264,912 |
| 16 | $10,486 | $17,821 | $254,426 |
| 17 | $11,227 | $17,080 | $243,199 |
| 18 | $12,021 | $16,286 | $231,178 |
| 19 | $12,871 | $15,437 | $218,308 |
| 20 | $13,780 | $14,527 | $204,527 |
| 21 | $14,755 | $13,553 | $189,773 |
| 22 | $15,798 | $12,510 | $173,975 |
| 23 | $16,914 | $11,393 | $157,061 |
| 24 | $18,110 | $10,197 | $138,951 |
| 25 | $19,390 | $8,917 | $119,560 |
| 26 | $20,761 | $7,546 | $98,799 |
| 27 | $22,229 | $6,078 | $76,571 |
| 28 | $23,800 | $4,507 | $52,771 |
| 29 | $25,483 | $2,825 | $27,288 |
| 30 | $27,288 | $1,023 | $0 |
A 5/1 ARM has a fixed rate for the first 5 years, then adjusts once per year based on a market index plus a margin. The intro rate is usually lower than a 30-year fixed, which lowers your early payments.
An ARM can make sense if you're confident you'll sell or refinance before the fixed period ends, or if intro rates are meaningfully below fixed rates. The risk is being stuck when rates rise — model your payment after adjustment before choosing one.
Sources: U.S. Department of Housing and Urban Development (FHA); U.S. Department of Veterans Affairs (VA loans); Consumer Financial Protection Bureau.
Estimates for educational purposes only — not a loan offer, financial advice, or a commitment to lend. Actual rates, payments, and terms vary by lender and creditworthiness.