ARM vs Fixed Rate Calculator
ARMs start with a lower rate but adjust after a fixed period. Whether that's better depends on how long you stay in the home. See the exact numbers for your situation.
What you'll need
- Loan amount
- 30-year fixed rate quote
- ARM type (5/1, 7/1, or 10/1)
- ARM initial rate
- Expected rate after adjustment
What you'll get
Monthly payment comparison
ARM vs fixed side by side
Initial monthly savings
How much ARM saves upfront
Break-even point
When fixed becomes cheaper
30-year interest comparison
Total cost at each scenario
How It Works
Enter loan details
Input loan amount, fixed rate, ARM initial rate, and adjustment caps.
Set your time horizon
ARM loans favor short stays; fixed rates protect you over 7+ years.
Compare total cost
See breakeven point, worst-case ARM scenario, and total interest by year.
ARM vs Fixed Rate: $400,000 Loan
| Year | Fixed 7% Payment | 5/1 ARM (5% → 8%) | ARM Savings/Cost |
|---|---|---|---|
| Years 1–5 | $2,661 | $2,147 | +$514/mo savings |
| Year 6+ | $2,661 | $2,935 | −$274/mo more |
| 10-yr total | $319,320 | $308,400 | $10,920 ahead |
| 15-yr total | $478,980 | $494,460 | $15,480 behind |
ARM favors buyers who sell or refinance within 5–7 years.
Frequently asked questions
When is an ARM better than a fixed-rate mortgage?
An ARM makes sense if you plan to sell or refinance before the fixed period ends. For a 5/1 ARM, if you're confident you'll move within 5 years, you capture the lower initial rate without exposure to adjustments. If rates also fall, the ARM could stay cheaper even after adjustment.
How much lower are ARM rates than fixed rates?
ARMs typically start 0.5–1.5% below 30-year fixed rates. The exact spread depends on market conditions and the ARM type (5/1, 7/1, 10/1). Longer fixed periods (10/1) have smaller discounts than shorter ones (5/1) because lenders take on more rate risk.
What happens when an ARM adjusts?
After the initial fixed period, the rate adjusts annually based on an index (usually SOFR) plus a margin. Most ARMs have caps: a periodic cap (how much the rate can change each year, typically 2%) and a lifetime cap (maximum change from the initial rate, typically 5–6%). Always ask your lender for the cap structure.
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