US ARM vs. Fixed-Rate Mortgage Calculator

Compare an adjustable-rate mortgage to a 30-year fixed loan over different time horizons. Model multiple rate-adjustment scenarios to see which option costs less for your situation.

Overview

A fixed-rate mortgage has the same interest rate for the entire loan term, giving predictable payments. An adjustable-rate mortgage (ARM) offers a lower initial fixed rate for a set period (3, 5, 7, or 10 years), then adjusts annually based on a benchmark index plus a margin. ARMs suit buyers who plan to sell or refinance before the initial fixed period ends. The risk is that rates can rise sharply after the fixed period; annual and lifetime caps limit how much the rate can increase. This calculator computes your fixed monthly payment, your ARM payment during the initial period and after adjustment, savings during the fixed period, and the break-even point where the fixed rate loan becomes cheaper if you stay beyond the ARM's fixed term.

How to use this calculator

Enter your loan amount.
Enter the fixed mortgage rate and the ARM's initial rate.
Select the ARM's initial fixed period (3, 5, 7, or 10 years).
Enter the ARM's per-adjustment rate cap and lifetime cap.
Enter the expected annual rate increase after the fixed period ends.
Set the loan term and how many years you plan to stay in the home.
Click Calculate to compare total costs and find your break-even point.

Example calculations

Example 1: Basic Calculation

A typical scenario using default values

{
  "loan_amount": 240000,
  "fixed_rate": 6.5,
  "arm_initial_rate": 5.5,
  "arm_fixed_period": 5,
  "arm_rate_cap_per_adjustment": 2,
  "arm_lifetime_cap": 5,
  "expected_rate_increase": 1,
  "loan_term": 30,
  "years_to_stay": 7
}

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