U.S. mortgage · local calculation
ARM vs fixed-rate calculator.
Enter the rates and caps from your quotes. See what a 5/1, 7/1 or 10/1 ARM costs in total at years 5, 7 and 10 against a 30-year fixed, and how bad it gets if every cap is hit.
After the fixed period, each adjustment sets the rate to the lowest of three limits, then re-amortizes the remaining balance over the remaining months.
New rate = min(index + margin, prior rate + cap, initial rate + lifetime cap)Your quotes
ARM vs 30-year fixed
Enter your quotes, or load the fictional example, to see the payments, cumulative cost and worst case.
How the ARM is modeled
Sources: CFPB, What is an adjustable-rate mortgage (ARM)? (page last reviewed January 14, 2025) for the index-plus-margin and cap mechanics, and Fannie Mae Selling Guide B3-6-04, Qualifying Payment Requirements (effective February 7, 2024) for the qualifying rate. The “5/1” naming is common industry shorthand rather than a term defined in those sources.
- Fixed period. The payment is the standard amortizing payment P = B × r / (1 − (1 + r)−n) at your initial rate over the full term.
- Adjustments. At each adjustment the new rate is the lowest of index + margin, prior rate + cap and initial rate + lifetime cap. The first adjustment uses your first-adjustment cap and later ones your periodic cap. The payment is then recomputed on the remaining balance over the remaining months.
- Your scenario holds the index at the value you enter. Worst case assumes the index is high enough to hit every cap until the lifetime cap.
- Cumulative cost is the sum of principal-and-interest payments through the end of year 5, 7 or 10. Compare the balance left too, since a lower payment can leave more owed.
- Not modeled. Rate floors, taxes, insurance, mortgage insurance, closing costs, points and the rate caps' exact wording on your note (some ARMs cap decreases). Rates and caps are never assumed; use your Loan Estimate.
Qualifying-rate note
The Fannie Mae table says that for an ARM with an initial fixed period of five years or less, the qualifying rate is the maximum interest rate that could apply during the first five years after the first payment is due. For an initial fixed period longer than five years, it is no less than the note rate, except the greater of the note rate or fully indexed rate for higher-priced mortgage loans. For a 5/1 the first adjustment follows the 60th payment, so under the loan terms you enter the first five years run at the note rate; the page shows that figure, but your lender decides how it applies the rule, and government and non-conforming loans differ.
Worked example (fictional)
A $400,000 loan over 30 years: 5/1 ARM at 6.00% with a 2.75% margin, 2/2/5 caps, and a 6.75% 30-year fixed. The fixed payment is about $2,594 and the ARM starts at about $2,398. If the index sits at 4.50% (fully indexed 7.25%), the rate becomes 7.25% at the first adjustment and the payment about $2,690. After 5 years the ARM has cost roughly $11,800 less than the fixed; after 10 years roughly $6,000 less. Hitting every cap instead takes the rate to 8%, 10%, then 11% and the payment to about $3,624, and after 10 years the ARM costs about $37,900 more than the fixed. Test your own numbers; the answer depends on how long you keep the loan.
This is a planning estimate, not a loan offer or advice. Use the rates, margin and caps on your Loan Estimate and ARM disclosure.
ARM vs fixed FAQs
What does 5/1 ARM mean?
The first number is the years the rate stays fixed; the second is how often it can adjust afterward, in years. A 5/1 ARM keeps its starting rate for five years, then can change once a year. Some ARMs adjust every six months; set the interval if yours does.
How does an ARM rate adjust?
The CFPB explains the new rate is based on the index plus a set margin, subject to caps. This page applies new rate = the lowest of index + margin, prior rate + the cap for that adjustment, and initial rate + the lifetime cap.
What is the worst case?
The index is assumed high enough that every adjustment hits its cap until the lifetime cap is reached. It is a ceiling on the rate for your caps, not a forecast.
Do I qualify at the starting rate?
Not necessarily. For conventional loans sold to Fannie Mae with an initial fixed period of five years or less, the qualifying rate is the maximum rate that could apply during the first five years; for longer fixed periods it is no less than the note rate (higher of note and fully indexed rate for higher-priced mortgage loans). Your lender decides.
Are rate floors, taxes or fees included?
No. Only principal and interest are modeled, and decreases are not limited by a floor. Add your own figures for taxes, insurance and closing costs elsewhere.