Adjustable rate mortgages, or ARMs for short, change the interest rate on the loan periodically to keep up with the current market trends. When interest rates fall, ARM rates go down without the borrowers having to refinance their loans. However, when rates rise, so do the interest rates charged on the ARM. Each time the interest rate changes, the monthly payment must be recalculated based on the new rate, the time left in the term of the mortgage and the amount of money still owed.

1. • 1

     Check your mortgage documents or contact your lender to determine how much you still owe on your loan and how many monthly payments you have remaining in your mortgage term. For example, you may have paid down your mortgage to $124,000 with 132 monthly payments, or 11 years, left on the loan.

   • 2

     Divide your new annual interest rate by 12 to find the new monthly interest rate. For example, if your interest rate changed to 5.16 percent, you would divide 0.0516 by 12 to get 0.0043 as the new monthly rate.

   • 3

     Add one to the new monthly interest rate. In this example, you would add one to 0.0043 to get 1.0043.

   • 4

     Raise the step 3 result to the power of the number of months remaining on the mortgage. For this example, you would raise 1.0043 to the 132nd power to get 1.761883042.

   • 5

     Subtract one from the step 4 answer. In this example, you would subtract one from 1.761883042 to get 0.761883042.

   • 6

     Divide the new monthly rate by the step 5 result. Continuing the example, you would divide 0.0043 by 0.761883042 to get 0.005643911.

   • 7

     Add the new monthly rate to the step 6 result. In this example, you would add 0.0043 to 0.005643911 to get 0.009943911.

   • 8

     Multiply the step 7 result by the amount remaining on your mortgage to find the new monthly payment after the interest rate has changed. Finishing the example, you would multiply $124,000 by 0.009943911 to find the new monthly payment to be $1,233.04.