ARM vs Fixed-Rate Mortgage Calculator
A lower rate now, in exchange for uncertainty later
ARM vs Fixed-Rate Mortgage Calculator
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Fixed-rate: interest over your hold period
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ARM: interest over your hold period
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Worst-case ARM payment jump
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if rates hit the cap right after adjustment
ARMs bet on you not keeping the loan long
An ARM's lower initial rate genuinely saves money if you sell or refinance before the fixed period ends — the risk is entirely back-loaded, appearing only if you're still in the loan when it starts adjusting.
Know your caps before you sign
ARMs have periodic and lifetime rate caps limiting how much the rate can jump at each adjustment and over the life of the loan — the worst-case scenario shown here assumes the rate jumps straight to the lifetime cap, which is a genuine possibility, not a scare tactic.
Fixed-rate removes the guesswork entirely
A fixed-rate mortgage costs more upfront in exchange for total payment certainty for 30 years — the "insurance premium" you're paying is the rate spread between the two options, and it's worth pricing explicitly rather than defaulting to whichever feels safer.
Interest during the hold period assumes the ARM stays at its initial rate for the fixed period shown (a simplification — if your hold period extends past the ARM's fixed period, actual cost would depend on real rate movements, not modeled here beyond the worst-case payment jump shown separately). The worst-case payment jump assumes the ARM adjusts straight to its rate cap immediately after the fixed period ends, on the then-remaining balance and remaining term — an extreme but genuinely possible scenario, not the expected case. Not financial advice.