ARM vs Fixed Rate Mortgage Calculator
An ARM offers a lower initial rate, but what happens when it adjusts? Compare total interest, monthly payments, and the exact break-even point between an adjustable and fixed mortgage.
1 Loan Details
2 Fixed-Rate Mortgage
3 Adjustable-Rate Mortgage (ARM)
Fixed Rate
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per month, every month
ARM (initial)
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for first 5 years
Initial Monthly Savings
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ARM vs fixed/mo
Initial Period Total Saved
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over initial period
Break-Even Point
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ARM starts costing more
Worst-Case Extra Cost
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ARM vs fixed (life cap)
Remaining Balance Over Time
ARM Payment Scenarios
| Scenario | Rate | Monthly Payment | vs Fixed |
|---|---|---|---|
| Enter loan details above | |||
When an ARM Makes Sense
An ARM can be the right choice if you plan to sell or refinance before the initial period ends. The lower teaser rate saves real money — but only if you're out before it adjusts.
- ✓ You plan to move within 5–7 years
- ✓ You expect rates to fall before adjustment
- ✓ You'll refinance before the initial period ends
- ✗ You plan to stay long-term in the home
- ✗ You can't afford the worst-case payment
Understanding ARM Caps
Most ARMs have three caps that limit how much the rate can increase:
- Initial cap — max increase at first adjustment (often 2–5%)
- Periodic cap — max increase per subsequent adjustment (often 2%)
- Lifetime cap — max total increase over the loan's life (often 5–6%)
Always stress-test the lifetime cap scenario — that's the worst case this calculator shows. If you can't afford it, a fixed rate is safer.
Once you've decided, use the Mortgage Calculator for your full PITI payment, or the Refinance Calculator to plan an exit from your ARM.
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Frequently Asked Questions
What is an adjustable-rate mortgage (ARM)?
An ARM has a fixed rate for an initial period (5, 7 or 10 years), then adjusts periodically, usually every 6 months, based on an index such as SOFR plus a fixed margin. A 7/6 ARM is fixed for 7 years and then adjusts every 6 months.
How do ARM rate caps work?
Caps limit how much the rate can change. A 2/1/5 cap means the first adjustment can move at most 2 points, later adjustments at most 1 point each, and the rate can never exceed the start rate plus 5 points.
When is an ARM better than a fixed-rate mortgage?
When you expect to sell or refinance before the fixed period ends and the ARM's starting rate is meaningfully lower. If you plan to stay long-term, a fixed rate removes the risk of higher payments.
Can I refinance an ARM into a fixed rate later?
Yes, if you qualify at that time. Refinancing costs 2–5% of the loan and depends on your credit, income and home equity then, so it is not guaranteed.