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ARM vs Fixed Mortgage Calculator

Compare an adjustable-rate mortgage against a fixed-rate mortgage, factoring in the ARM's post-adjustment rate.

Simulates the ARM month by month: initial rate for the fixed period, then a re-amortization at the adjusted rate.

Fixed-rate
$
%
yr
ARM
%
yr
%
yr
Fixed costs less in interest
$52,485
Assuming the ARM adjusts to 7.5% after 5 years.
Fixed monthly
$2,528
ARM initial monthly
$2,334
ARM adjusted monthly
$2,742
Fixed total interest
$510,178
ARM total interest
$562,663
Difference (ARM − Fixed)
+$52,485
Explain this result

Turn the numbers above into plain-language takeaways. Educational only — not financial advice.

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Overview

How the ARM vs Fixed Calculator Works

An adjustable-rate mortgage trades certainty for a lower rate during an introductory period. Whether that trade pays off depends entirely on two things you can estimate but not know: where rates go after the fixed period ends, and how long you actually keep the loan. This calculator simulates both loans month by month, applies the adjusted rate when the ARM resets, and shows you the crossover point where the fixed loan becomes the cheaper choice.

Formula

The Math Behind the Calculator

Both loans use standard amortization, M = P × r / (1 − (1 + r)^−n). The ARM is amortized at the initial rate for the fixed period, then the remaining balance is re-amortized over the remaining term at the adjusted rate. Total interest for each path is summed and compared, and the breakeven is the month at which cumulative ARM cost exceeds cumulative fixed cost.

Example

A Worked Example

On a $400,000 loan over 30 years, a 5/1 ARM at 5.75% costs $2,334 a month for the first five years versus $2,528 on a 6.50% fixed — a saving of $194 a month, or $11,640 over the intro period. If the ARM adjusts to 7.75% in year six, the payment jumps to about $2,808, and the accumulated saving is wiped out roughly 25 months later. Sell or refinance before month 85 and the ARM wins; hold past it and the fixed loan wins.

How to use

How to Use the ARM vs Fixed Calculator

  1. 1Enter the loan amount and the full term, usually 30 years for both products.
  2. 2Enter the ARM's initial rate and how many years it stays fixed — the 5 in a 5/1 ARM.
  3. 3Enter the rate you expect after adjustment. A realistic worst case is the index plus the margin, capped by the lifetime cap in your note.
  4. 4Enter the competing fixed rate you have actually been quoted.
  5. 5Compare the breakeven month against how long you honestly expect to keep this loan.
Interpretation

What the Results Mean

  • Initial monthly savings is the guaranteed benefit of the ARM during the fixed period.
  • Post-adjustment payment is the risk: it is what your budget must absorb if you still hold the loan when the rate resets.
  • The breakeven month is the decision point — beyond it, the ARM's early savings have been consumed by higher later payments.
  • Total interest for each path shows the lifetime cost if you hold both loans to maturity, which is usually the least favourable case for an ARM.
Keep exploring

Smart Next Steps

What to explore next
Avoid

Common Mistakes to Avoid

  • Assuming you will refinance or move before the reset. Plans change, and a high-rate environment can make refinancing impossible exactly when you need it.
  • Entering an optimistic post-adjustment rate instead of stress-testing against the lifetime cap.
  • Ignoring periodic caps, which limit how much the rate can move at each adjustment and change the payment path.
  • Choosing an ARM to qualify for a larger loan, which converts a rate risk into an affordability risk.
  • Overlooking that ARMs often carry different closing costs and index margins between lenders.
Scope

Limitations of This Calculator

  • It models a single adjustment to one rate. Real ARMs adjust repeatedly, typically annually after the fixed period.
  • Initial, periodic, and lifetime caps are not enforced, so an entered adjusted rate could exceed what your note permits.
  • It does not project rates. The post-adjustment rate you enter is an assumption, not a forecast.
  • Taxes, insurance, PMI, and HOA are excluded — these are principal-and-interest comparisons.
  • Closing costs, points, and prepayment penalties are not included in the breakeven.
Keep going

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FAQ

Frequently Asked Questions

What does 5/1 ARM mean?+

The rate is fixed for the first five years, then adjusts once every year afterwards. A 7/6 ARM is fixed for seven years and then adjusts every six months.

How high can my ARM rate actually go?+

Your note specifies three caps: the maximum first adjustment, the maximum per subsequent adjustment, and a lifetime ceiling. A common structure is 2/2/5, meaning the rate can never exceed the start rate plus five points.

When does an ARM make sense?+

When you are confident you will sell or refinance before the reset, when the rate gap is large enough to matter, and when your budget could still absorb the capped worst-case payment.

Can I refinance out of an ARM before it adjusts?+

Usually yes, but refinancing depends on rates, your equity, and your credit at that moment. Do not treat it as a guaranteed escape hatch.

Why is the ARM payment sometimes higher after adjusting than a fixed loan taken today?+

Because the ARM re-amortizes the remaining balance over the remaining term at the new rate. A shorter remaining term concentrates the balance into fewer payments.

Financial Disclaimer

This calculator is for educational and estimation purposes only. It does not provide financial, mortgage, tax, investment, or legal advice. Actual rates, payments, taxes, fees, insurance costs, eligibility, and loan terms vary by lender, location, credit profile, and market conditions. Always compare official offers and consult a qualified professional before making financial decisions.

Last updated June 2026 · Prepared by the mCalculator Editorial Team