ARM vs Fixed Mortgage Calculator
Compare an adjustable-rate mortgage against a fixed-rate loan — intro payment, the payment after the ARM adjusts, and total cost over the fixed period.
How it works
Payment = P·r ÷ (1 − (1+r)^−n) · Intro saving = (fixed − intro) × intro months · After-rate payment amortizes the balance left when the fixed period ends
An ARM trades a lower opening rate for interest-rate risk. During the fixed intro period the payment is locked and usually below a comparable fixed loan; after that it resets to an index plus margin and can rise sharply. The gamble pays off if you sell, refinance, or the payment stays low before the reset — and backfires if rates climb and you still hold the loan.
Worked example
On a $350,000 30-year loan, a 5/1 ARM at 5.5% pays about $1,987/mo versus $2,212 fixed at 6.5% — roughly $225/mo saved for five years. But if it resets to 7.5%, the payment climbs to around $2,360, a jump of over $370 from the intro payment.
Frequently asked questions
What does 5/1 ARM mean?
The rate is fixed for the first 5 years, then adjusts once every 1 year afterward. A 7/6 ARM is fixed 7 years then adjusts every 6 months.
Is an ARM riskier than a fixed mortgage?
Yes — after the intro period the payment can rise with market rates, so your future cost is uncertain. Rate caps limit each adjustment and the lifetime maximum, but the payment can still climb well above the intro amount.
When does an ARM make sense?
When you are confident you will sell or refinance before the fixed period ends, or when intro-rate savings meaningfully beat the fixed option and you can absorb a higher future payment.
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Educational estimate, not financial advice. Confirm figures with your lender or a licensed professional.