ARM vs. Fixed-Rate Mortgage

A fixed rate mortgage has the same payment for the entire term of the loan. An adjustable rate mortgage (ARM) has a rate that can change, causing your monthly payment to increase or decrease. Use this calculator to compare a fixed rate mortgage to a Fully Amortizing ARM.

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By changing any value in the following form fields, calculated values are immediately provided for displayed output values. Click the view report button to see all of your results.

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*indicates required.

Fixed Rate Mortgage:

Monthly payment $0.00

Mortgage amount:*This entry is required.Enter an amount between $0 and $250,000,000

Term in years:*This entry is required.

Interest rate:*This entry is required.Enter an amount between 1% and 25%

Report amortization:

Report amortization

Annually

Monthly

Fully Amortizing ARM:

Initial payment $0.00

Initial interest rate:*This entry is required.Enter an amount between 1% and 25%

Months rate fixed:*This entry is required.Enter an amount between 1 and 360

Adjustment frequency:*This entry is required.Enter an amount between 1 and 12

Expected Adjustment:*This entry is required.Enter an amount between -3% and 3%

Interest rate cap:*This entry is required.Enter an amount between 5% and 25%

**FIG_GRAPHTITLE** Column Graph: Please use the calculator's report to see detailed calculation results in tabular form.

Monthly Payment by Mortgage Type

Definitions

Fixed Rate Mortgage

A fixed-rate mortgage has the same interest rate and monthly payment throughout the term of the mortgage.

Fully Amortizing ARM

This calculator shows a "fully amortizing" ARM, which is the most common type of ARM. The monthly payment is calculated to pay off the entire mortgage balance at the end of a 30-year term. After the initial period, the interest rate and monthly payment adjust at the frequency specified. The amount an ARM can adjust each year, and over the life of the loan, are typically capped. Below is a list of common ARMs.

Common Adjustable Rate Mortgages
ARM Type	Months Fixed
10/1 ARM	Fixed for 120 months, adjusts annually for the remaining term of the loan.
7/1 ARM	Fixed for 84 months, adjusts annually for the remaining term of the loan.
5/1 ARM	Fixed for 60 months, adjusts annually for the remaining term of the loan.
3/1 ARM	Fixed for 36 months, adjusts annually for the remaining term of the loan.
10/6 month ARM	Fixed for 120 months, adjusts every six months for the remaining term of the loan.
7/6 month ARM	Fixed for 84 months, adjusts every six months for the remaining term of the loan.
5/6 month ARM	Fixed for 60 months, adjusts every six months for the remaining term of the loan.
3/6 month ARM	Fixed for 36 months, adjusts every six months for the remaining term of the loan.

Mortgage amount

Original or expected balance for your mortgage.

Term in years

The number of years over which you will repay this loan. Common fixed-rate mortgage terms are 15, 20 and 30 years.

Expected adjustment

The annual adjustment you expect in your ARM, after the initial period ends. The range for this calculator is minus 3% to plus 3%. Use a negative value if you believe interest rates will decrease, a positive value if you believe they will increase.

Interest rate

Annual interest rate for each mortgage type. Typically an ARM will have a lower initial interest rate than a fixed-rate mortgage. Please note that the interest rate is different from the Annual Percentage Rate (APR), which includes other expenses such as mortgage insurance, and the origination fee and or point(s), which were paid when the mortgage was first originated. The APR is normally higher than the simple interest rate.

Months rate fixed

This is the number of months the rate is fixed for an ARM. During this period the interest rate and the monthly payment will remain fixed. The rate will then adjust annually by the amount entered in the "Expected Adjustment" field.

Months between adjustments

The number of payment periods between potential adjustments to your interest rate. The most common is 12 months, which means your payment could change at most once per year. Loans using the SOFR benchmark have six months between adjustments. The SOFR benchmark is based on what U.S. financial institutions pay each other for overnight loans. It is often used as a replacement for the LIBOR benchmark which is no longer used.

Interest rate cap

This is the highest allowable interest rate for your mortgage. Your interest rate can never be adjusted above this rate.

Monthly payment

Monthly principal and interest payment (PI) for the fixed-rate mortgage and the fully amortizing ARM.

Information and interactive calculators are made available to you only as self-help tools for your independent use and are not intended to provide investment or tax advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.