ARM vs Fixed Mortgage Calculator
Compare a 5/1 adjustable-rate mortgage (ARM) against a 30-year fixed-rate mortgage side by side. See starting payments, worst-case reset payments after the fixed period, and total interest paid over the full loan so you can decide which structure fits your plans.
What Is an ARM vs a Fixed Mortgage?
A fixed-rate mortgage locks in one interest rate for the entire loan term, usually 15 or 30 years. An adjustable-rate mortgage (ARM) offers a lower initial rate for a fixed period — commonly 5, 7, or 10 years — then adjusts annually based on an index plus a margin. A 5/1 ARM means 5 years fixed, then resets every 1 year. ARMs typically start 0.5% to 1.5% below a comparable fixed rate, which lowers early payments but shifts interest-rate risk onto the borrower.
How the Reset Math Works
Each ARM has three caps: an initial adjustment cap (often 2%), a periodic cap (often 2% per year), and a lifetime cap (often 5% above the start rate). If you take a 6.5% 5/1 ARM with 2/2/5 caps, the worst-case rate in year 6 is 8.5%, rising up to 11.5% over the life of the loan. This calculator computes your payment at the starting rate and at the lifetime cap, so you see both the best and worst possible payments.
When an ARM Makes Sense
An ARM usually wins when you plan to sell or refinance within the fixed period, when rates are expected to fall, or when you need the lower initial payment to qualify. A fixed loan wins when you plan to stay long-term, rates are low, or you want payment certainty. Run both scenarios through this calculator with realistic assumptions about how long you will hold the home.
Total Interest Comparison
Even though an ARM starts cheaper, a worst-case reset can make its lifetime interest cost higher than the fixed loan. For a $400,000 loan at 6.5% ARM start vs 7.25% fixed, the ARM saves about $180/month for five years — roughly $11,000 — but a jump to 8.5% in year 6 adds $300/month. Compare both the payment and the total interest line to decide which structure serves you better.