Option ARM Calculator
Use this calculator to see how a minimum payment on an Option ARM Mortgage can save you money on your monthly mortgage payment.
How the option arm calculator works
It shows the four payment choices an option ARM offers — a minimum payment, interest-only, a 30-year and a 15-year payment — and flags negative amortization when the minimum payment is less than the interest owed.
Worked example: with loan amount of $400,000, note interest rate of 6.50% and minimum-payment rate of 2.50%, the option arm calculator shows minimum payment of $1,580.48.
- Minimum payment
- $1,580.48
- Interest-only
- $2,166.67
- 30-year payment
- $2,528.27
- 15-year payment
- $3,484.43
The formula
Minimum payment uses an artificially low rate; interest-only = balance × rate ÷ 12. Negative amortization = interest owed − minimum payment, added to the balance.
Results are estimates for educational purposes and are not financial advice. Confirm exact figures with your lender, plan administrator or advisor.
Questions about the option arm calculator
What is an option ARM?
A “pick-a-payment” mortgage that lets you choose among several payment levels each month. The lowest option can be less than the interest due, causing your balance to grow.
What is negative amortization?
When your payment does not cover the interest, the shortfall is added to your loan balance — so you owe more over time. The minimum option ARM payment can trigger it.
Are option ARMs still common?
No — they contributed to the 2008 housing crisis and are now rare and tightly regulated. This calculator illustrates why the minimum payment is so risky.
Is the Option ARM Calculator free to use?
Yes. Every calculator on FinCalculators is completely free, with no sign-up, login or paywall. You can run as many scenarios as you like.