ARM vs Fixed-Rate Mortgage Calculator

ARM rates are typically 0.5–1% lower than 30-year fixed rates — but they adjust after the initial period. This calculator models three rate scenarios to show when the fixed rate wins and when the ARM saves you money.

Your loan

Loan amount

Fixed rate (30-year)

ARM initial rate

Current 5/1 ARM avg: ~6.70%

ARM type

How long you plan to stay

Rate cap after adjustment (worst case)

Typical: initial + 5% lifetime cap

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Fixed monthly payment

—

Never changes

ARM initial payment

—

During fixed period

ARM monthly savings

—

Vs fixed during initial period

ARM worst-case payment

—

After adjustment at cap rate

Fixed: total cost over stay period—

ARM: total cost (rates stay flat)—

ARM: total cost (rates rise to cap)—

ARM savings vs fixed (flat scenario)—

ARM extra cost vs fixed (cap scenario)—

When an ARM Makes Sense

An ARM is worth considering when: (1) you are certain you will sell or refinance before the fixed period ends, (2) you believe rates will fall before adjustment, or (3) the monthly savings are large enough to meaningfully impact your finances during the initial period. ARMs were widely used in 2021-2022 and caused significant payment shock when rates rose sharply.

What does 5/1 ARM mean?

📚 A 5/1 ARM has a fixed interest rate for the first 5 years, then adjusts every 1 year after that based on an index (usually SOFR) plus a margin. Common ARM notation: first number = years fixed; second number = adjustment frequency. Rate caps typically follow a 2/2/5 structure: rate can rise max 2% at first adjustment, max 2% per annual adjustment after that, and max 5% total over the life of the loan.