Fixed vs Adjustable Rate Mortgage Calculator
Compare the long-term lifetime costs of locking in a fixed rate versus taking the initial discount of an ARM.
Input your parameters to generate the Fixed vs Adjustable Rate Comparison results.
How to Use This Calculator
Get accurate results in seconds by following these simple steps.
Enter Loan Parameters
Input the loan amount and the fixed rate offered by your lender.
Set ARM Details
Enter the ARM teaser rate, adjustment interval, expected caps, and projected rate after adjustment.
Analyze the Comparison
View the side-by-side payment comparison to determine which structure puts more money in your pocket.
Why Use This Tool?
Risk Quantification
Attach a real dollar amount to the risk of choosing an ARM over the safety of a fixed rate.
Timeline Awareness
Understand exactly when the ARM teaser period expires and what your payment could become.
Strategic Decision-Making
Perfect for borrowers deciding between short-term savings and long-term stability.
How the Comparison Works
This tool generates a side-by-side comparison of a standard Fixed Rate mortgage and an Adjustable Rate Mortgage (ARM) over the same loan term.
The Fixed Rate calculation is straightforward: it amrotizes your loan amount over the full term at a single, unchanging interest rate.
The ARM scenario is modeled accurately using standard financial mathematics. It calculates your initial discounted monthly payment for the introductory period (e.g. 5 years for a 5/1 ARM). Then, it calculates the remaining principal balance and amortizes that amount over the remaining years (e.g. 25 years) at the new, adjusted interest rate you estimate.
Frequently Asked Questions
If you plan to sell the home or refinance before the introductory period ends (e.g. within 5 years), the lower initial rate of an ARM can save you significant money compared to a higher fixed rate.
Yes. For simplicity and comparison, the tool assumes the rate adjusts once to your estimated 'New Rate' and remains there for the life of the loan. In reality, ARMs adjust periodically based on market indexes.
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