How do I pick a realistic 'assumed adjusted rate'?

Check your Loan Estimate's actual rate-cap structure (e.g. 2/2/5) and apply it to your ARM's initial rate — that gives you the real maximum.

Why would anyone choose an ARM over a fixed-rate loan?

A lower initial rate means lower payments now, which some borrowers value if they plan to sell, refinance, or pay off the loan before the first adjustment.

Does this account for rate caps automatically?

No — you enter your own assumed post-adjustment rate directly. The disclaimer explains typical cap structures so you can pick a realistic number.

What if the ARM adjusts more than once during my term?

This tool simplifies to one rate after the initial fixed period, applied for the rest of the term — a simplification, not a full multi-reset simulation.

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Finance

ARM vs. Fixed-Rate Mortgage Calculator

Total interest under a fixed-rate loan vs. an ARM at your own assumed post-adjustment rate.

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Last reviewed 2026-09-01

About the ARM vs. Fixed-Rate Mortgage Calculator

Compares total interest between a fixed-rate mortgage and an adjustable-rate mortgage (ARM), using your own assumed rate for after the ARM's initial fixed period ends — since no calculator can know future rates, this makes that assumption explicit and adjustable rather than hiding it.

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How to use it

Enter the loan amount and term.
Enter the fixed-rate loan's rate, and the ARM's initial rate and structure (5/6, 7/6, or 10/6).
Enter your own assumed rate for after the ARM adjusts.
Compare monthly payments and total interest across both loans.

Formula

Monthly payment = P × r / (1 − (1+r)^−n), computed for the fixed loan over the full term, and separately for the ARM's initial period. Remaining balance at the adjustment date = P×(1+r)^k − M×((1+r)^k−1)/r, where k is the number of payments made in the initial period. The ARM's post-adjustment payment re-amortizes that remaining balance at your assumed adjusted rate. Total interest = total of all payments − original principal.

Worked example

A $400,000, 30-year loan: a 6.75% fixed-rate loan costs about $534,000 in total interest. A 5/6 ARM at an initial 6.0% (resetting to an assumed 7.5% after year 5) costs about $569,000 in total interest — roughly $35,000 more.

Common post-2023 conforming ARM structures

Common post-2023 conforming ARM structures
ARM type	Fixed period	Adjusts every	Typical cap structure
5/6 ARM	5 years	6 months	2/2/5 (commonly cited)
7/6 ARM	7 years	6 months	2/2/5 (commonly cited)
10/6 ARM	10 years	6 months	2/2/5 (commonly cited)

Interpreting your result

Real ARMs cap how much the rate can move using a structure commonly written as e.g. 2/2/5: at most a 2-point change at the first adjustment, at most 2 points at any later adjustment, and at most 5 points above the initial rate over the life of the loan. This tool uses one assumed post-adjustment rate for the entire remaining term rather than simulating every future adjustment individually. Most conforming ARMs now adjust every 6 months after the initial fixed period (hence '5/6' rather than the older '5/1' naming).

Recommendations

• An ARM usually only wins financially if you sell, pay off, or refinance before or shortly after the first adjustment.
• Check your specific Loan Estimate for the real cap structure (e.g. 2/2/5) before choosing an assumed adjusted rate.
• An ARM's lower initial payment can free up cash flow now, which has value even if the total-interest comparison favors the fixed loan.

Frequently asked questions

The rate is fixed for the first 5 years, then adjusts every 6 months for the rest of the term. The older '5/1' naming (adjusts annually) has mostly been replaced since the 2023 LIBOR-to-SOFR index transition.