Fixed vs ARM Calculator

How to Use This Calculator

Enter the same loan amount for both scenarios, then set the fixed rate and ARM details. The calculator shows monthly payments, total interest, and total cost side by side so you can see exactly how each structure performs over time.

• Loan Amount: The total mortgage amount for both scenarios.
• Fixed Rate: The annual rate on a 30-year fixed mortgage (e.g., 6.5%).
• ARM Initial Rate: The starting rate for the ARM (typically 0.5-1% lower than fixed).
• ARM Fixed Period: How many years the ARM rate stays fixed (5, 7, or 10 years).
• Rate Adjustment: Assumed rate increase after the fixed period ends.

Understanding Your Results

The calculator shows three key comparisons:

• Monthly Payment: The ARM starts lower, but may increase after the fixed period. The fixed payment stays the same for 30 years.
• Total Interest: The cumulative interest paid over the full loan term. The ARM often costs more in total interest if you hold long-term.
• Break-Even Point: The number of years it takes for the ARM savings to disappear. If you sell or refinance before this point, the ARM wins.

The results help you decide based on your actual timeline, not guesswork.

Fixed Rate Mortgages

A fixed rate mortgage locks in your interest rate for the life of the loan, providing predictable monthly payments.

Pros

• Stable payments: Your principal and interest payment never changes, making budgeting simple.
• Protection from rate increases: Even if market rates spike, your rate stays the same.
• Best for long-term ownership: If you plan to stay 7+ years, fixed is almost always the safer choice.

Cons

• Higher initial rate: You pay a premium for the certainty — typically 0.5-1% above the ARM starting rate.
• Can't benefit from rate drops: If rates fall, you need to refinance to get a lower rate (and pay closing costs).

Adjustable Rate Mortgages

An ARM starts with a lower fixed rate for a set period (5, 7, or 10 years), then adjusts annually based on market conditions.

Pros

• Lower initial payments: The teaser rate is typically 0.5-1% below the fixed rate, saving $100-300/month on a typical loan.
• Good for short-term ownership: If you sell or refinance within the fixed period, you keep the full savings.
• Qualify for more home: The lower initial payment can help you qualify for a larger loan.

Cons

• Payment shock: After the fixed period, your rate and payment can increase significantly — potentially 30-50% higher.
• Harder to budget: You don't know what your payment will be after adjustment, making long-term planning difficult.
• Risk of being underwater: If home values drop and rates rise, you could owe more than the home is worth.

When to Choose Each Option

• Choose Fixed if: You plan to stay 7+ years, you value payment certainty, you're risk-averse, or current rates are already low.
• Choose ARM if: You plan to sell or refinance within 5-7 years, you expect your income to grow, or you need the lower initial payment to qualify.
• Consider both: Run the numbers with our calculator — the right answer depends on your specific rate environment and timeline.

For a deeper analysis, read our ARM vs Fixed-Rate Mortgage guide with break-even tables and worked examples.

Frequently Asked Questions

Should I choose a fixed rate or ARM? It depends on your timeline. If you plan to stay more than 7-10 years, a fixed rate provides more stability. If you plan to sell or refinance within 5-7 years, an ARM's lower initial rate could save you money.

How much can an ARM rate increase? ARMs have caps that limit rate increases. Most allow 2% per adjustment period and 5-6% over the life of the loan. Even with maximum increases, your payment won't exceed a certain level.

What's the main advantage of an ARM? The main advantage is a lower initial interest rate compared to fixed mortgages. This means lower monthly payments initially, which can be beneficial if you don't plan to stay in the home long-term.

Related Calculators

• ARM Calculator — See how your ARM payment adjusts over time
• Mortgage Calculator — Standard payment with PITI breakdown
• Compare Mortgages — Side-by-side scenario comparison