ARM vs Fixed Rate Comparison

What This Calculator Does (In Layman's Terms)

A fixed-rate mortgage keeps the same interest rate for its full term. An adjustable-rate mortgage (ARM) holds its rate steady at first, then can change on a schedule. This calculator compares the initial savings with possible future payment changes.

Enter both starting rates and test a higher ARM rate after the fixed period. Do not assume you can sell or refinance before an increase. Ask the lender for the index, margin, adjustment dates and caps; taxes and insurance can change even on a fixed-rate loan.

What Every Term & Number Means in Plain English

Fixed rate

An interest rate that does not change during the loan term.

Initial ARM rate and period

The starting rate and the number of years before adjustments begin.

Index and margin

The market benchmark plus the lender’s added percentage used to set a later rate, subject to limits.

Adjustment caps

Limits on the first increase, later increases and the lifetime rate. They do not guarantee rates will stay low.

Payment after reset

The recalculated payment using the remaining balance and months at the new rate.

Initial savings

The fixed payment minus the starting ARM payment; these savings may shrink or reverse after a reset.

Real-World Example Scenario

For $300,000 over 30 years, 6.5% fixed costs about $1,896 monthly for principal and interest.

An ARM starting at 5.5% costs about $1,703 initially: about $193 monthly savings, or $11,580 over five years before fees.

After five years, the ARM balance is roughly $277,400. If its terms allow an 8% reset, the payment over the remaining 25 years is about $2,141. Budget for that increase rather than treating the starting rate as permanent.

Loan Program Comparison: 2026 Benchmarks

ARM vs. Fixed Rate Mortgage Calculator — Use the note rate for amortization, then add taxes, insurance and mortgage insurance. Stress-test assumptions and share only numeric scenario inputs, never personal identifiers.

Historical 2025 one-unit comparison: conforming $806,500; FHA floor $524,225. County and unit-count limits can differ.

Loan program	Down payment / equity	2026 one-unit baseline	Costs and page-specific comparison
Conventional	3%–5% subject to eligibility	$832,750	PMI generally below 20% down
FHA	3.5% at 580+; 10% at 500–579	$541,287 floor	1.75% upfront MIP; 0.55% annual for >95% LTV, base loan ≤$726,200, term >15 years
VA	0% for eligible borrowers	No VA limit with full entitlement	No monthly PMI; funding fee unless exempt
USDA	0% for eligible borrowers	Income, address and repayment eligibility	Guarantee and annual fees; confirm current schedule
Jumbo	Lender-specific cash and reserves	Above applicable conforming limit	Lender-specific pricing and insurance
Home Equity / Refinance	Equity and underwriting dependent	Property and lender dependent	Compare closing costs, term and break-even

Sources: FHFA limits; HUD FHA limits.

How we calculate payments

Monthly principal and interest use P × r / (1 − (1 + r)⁻ⁿ), where P is the loan amount, r is the monthly note rate and n is the number of payments. At zero interest, use P / n. Add property taxes, homeowners insurance and applicable mortgage insurance to estimate the full payment. Use parcel-specific taxes and an insurance quote when comparing homes.

APR includes applicable finance charges; use the note rate, not APR, for amortization. Compare Loan Estimates with the CFPB guide.