ARM vs Fixed Rate Calculator
Compare adjustable-rate and fixed-rate mortgage costs over time.
This tool is for informational and educational purposes only. It is not a substitute for professional financial, medical, legal, or engineering advice. See Terms of Service.
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This tool compares adjustable-rate and fixed-rate mortgage options so you can make an informed decision:
- Enter your loan amount. This is the mortgage principal after your down payment.
- Set the fixed rate. Enter the interest rate for a traditional fixed-rate mortgage. Check current rates from your lender.
- Enter ARM details. Set the initial ARM rate, fixed period (typically 5 or 7 years), annual adjustment cap, and lifetime maximum rate. Your lender will provide these terms.
- Review the comparison. The calculator shows your initial monthly savings with the ARM, the worst-case payment after adjustments, and the total cost difference over the loan term.
ARM loans offer lower initial rates but carry risk if rates rise. This calculator shows both the best and worst case scenarios to help you decide.
About ARM vs Fixed Rate Mortgages
A fixed-rate mortgage locks your interest rate for the entire loan term. Your payment never changes. An adjustable-rate mortgage (ARM) starts with a lower rate for a fixed period (commonly 5, 7, or 10 years), then adjusts periodically based on market rates.
ARMs are typically described as 5/1, 7/1, or 10/1, where the first number is the fixed period in years and the second is how often it adjusts afterward (annually). Rate caps limit how much the rate can increase per adjustment and over the loan's lifetime.
ARMs make sense if you plan to sell or refinance before the fixed period ends. Fixed rates make sense if you plan to stay long-term and want payment certainty.
Frequently Asked Questions
Is an ARM or fixed-rate mortgage better?
Neither is universally better. An ARM saves money initially but carries rate risk. If you plan to move or refinance within the ARM's fixed period, the lower initial rate saves you money. If you plan to stay in the home long-term, a fixed rate provides certainty and protection against rising rates.
What happens when an ARM adjusts?
After the fixed period ends, the rate adjusts annually based on a market index plus a margin. Rate caps limit the increase: typically 2% per year and 5-6% over the life of the loan. Your payment is recalculated each year based on the new rate and remaining balance.
What is the worst case with an ARM?
The worst case is the rate hitting its lifetime cap. For example, a 5/1 ARM starting at 5.5% with a 6% lifetime cap could reach 11.5%. This calculator shows the worst-case monthly payment so you can confirm you could handle it before choosing an ARM.