 Fixed Rate Mortgage
 A fixed rate mortgage has the same interest rate and monthly payment throughout the term of the mortgage. The payment is calculated to payoff the mortgage balance at the end of the term. The most common terms are 15 year and 30 years.
 Option ARM Mortgage
 This is a special mortgage program designed to give you an very low payment. This mortgage can result in your principal balance increasing when the monthly payment doesn't cover all of the accrued interest.
 Fully index rate (FIR)
 This is the interest rate used to accrue interest on the Option ARM after the intial fixed period has ended.
 Maximum annual increase
 This is the maximum amount the Option ARM's monthly payment can increase each year through year five, regardless of the Fully Index Rate (FIR).
 Fully Amortizing ARM
 This is the most common type of ARM. The monthly payment is calculated to payoff the entire mortgage balance at the end of the term. The term is typically 30 years. After any fixed interest rate period has passed, the interest rate and payment adjusts annually. A Fully Amortizing ARM will also have a maximum rate that it will not exceed. This calculator uses a maximum interest rate of 12%. Below is a list of the most common types of Fully Amortizing ARMs.
Common Adjustable Rate Mortgages 
ARM Type  Months Fixed 
10/1 ARM  Fixed for 120 months, adjusts annually for the remaining term of the loan. 
7/1 ARM  Fixed for 84 months, adjusts annually for the remaining term of the loan. 
5/1 ARM  Fixed for 60 months, adjusts annually for the remaining term of the loan. 
3/1 ARM  Fixed for 36 months, adjusts annually for the remaining term of the loan. 
1 year ARM  Fixed for 12 months, adjusts annually for the remaining term of the loan. 
 Interest Only ARM
 An Interest Only ARM only requires monthly interest payments. Since you are not paying any principal, as you are with the other two types of mortgages described above, this can lower your monthly payment. However, since your mortgage's principal balance is not decreased, you will either have a balloon payment at the end of the mortgage's term or at some point the mortgage will convert to a Fully Amortizing ARM. Like a Fully Amortizing ARM, an Interest Only ARM will often have a period where the interest rate is fixed, and then it is adjusted annually. An Interest Only ARM will also have a maximum interest rate that it will not exceed. This calculator uses a maximum interest rate of 12%.
 Mortgage amount
 Expected balance for your mortgage.
 Term in years
 The number of years over which you will repay this mortgage. The most common mortgage terms are 15 years and 30 years.
 Expected rate change
 The annual adjustment you expect in your ARM. The range for this calculator is minus 3% to plus 3%. Use a negative value if you believe interest rates will decrease, a positive value if you believe they will increase.
 Interest rate
 Annual interest rate for each mortgage type. Typically an ARM will have a lower interest rate than a fixed rate mortgage. The rate of an Interest Only ARM will vary by lender.
 Months rate fixed
 This is the number of months the rate is fixed for an ARM. During this period the interest rate and the monthly payment will remain fixed. The rate will then adjust annually by the expected rate change.
 Interest rate cap
 This is the maximum interest rate for this mortgage. The mortgage's interest rate will never exceed the interest rate cap.
 Monthly payment
 Monthly principal and interest payment (PI) for the Fixed Rate Mortgage and the Fully Amortizing ARM. This is an interest only payment for an Interest Only ARM.
