ARM vs Fixed Rate Calculator
Compare adjustable-rate mortgages to fixed-rate loans. See payment projections over time and find which option is better for your situation.
Fixed Rate Loan
Adjustable Rate Loan (ARM)
ARM vs Fixed Rate Guide
What is an ARM?
An adjustable-rate mortgage (ARM) has a fixed initial rate period (e.g., 5 years for a 5/1 ARM), after which the rate adjusts annually based on a market index. ARMs typically start 0.5-1.5% lower than fixed rates but carry the risk of rate increases.
When Does an ARM Make Sense?
ARMs work best when: you plan to sell or refinance before the adjustment period, rates are expected to drop, or the initial savings are significant. If you plan to stay 10+ years and rates are reasonable, fixed is usually safer.
ARM Rate Caps
Most ARMs have three caps: initial adjustment cap (how much the rate can change at first adjustment), periodic cap (max change per year after), and lifetime cap (maximum rate ever). A typical structure is 2/2/5, meaning 2% initial, 2% periodic, 5% lifetime cap above the initial rate.