ARM vs Fixed Rate Mortgage Calculator

The Upfront ARM Savings

ARMs often start with a rate below comparable fixed-rate loans, though the size of the gap varies by lender and over time. How much that saves each month depends on the loan size and the rate gap you enter, so the calculator works it out for your figures rather than relying on a fixed rule of thumb. The catch is what happens after reset.

When the ARM Bet Pays Off

ARM saves money when rates stay flat or fall. If rates rise, the reset payment can erase several years of initial savings in one year. ARM savings during the initial period are conditional on rates not rising before reset; borrowers who move or refinance before the reset date avoid that exposure.

Run it with sensible defaults

Using loan amount of 300,000, arm initial rate of 5, fixed rate alternative of 6.5, term of 30, the calculation works out to 285.74. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Loan Amount, ARM Initial Rate, Fixed Rate Alternative, and Term — do not pull with equal force. Two inputs usually tip the answer one way or the other. Flipping each value past a round threshold shows which input moves the result most.

How the math works

Computes standard amortized monthly payment at both rates over the same term. Five-year savings multiplies the monthly difference by 60 months. Results are estimates for illustration purposes only and do not factor in reset risk or rate-cap behavior.

What the headline rate hides

Lenders quote a rate; what you pay is a blend of that rate, fees, insurance, and any early-repayment penalty built into the product. The figure here isolates the core interest cost so you can compare like-for-like across deals; fees, insurance, and other costs sit on top of that base.

What this doesn't capture

The figure shown reflects the core calculation; additional costs such as arrangement fees, valuation, legal fees, insurance, and any early-repayment charges (where applicable) sit on top and can add materially to the total cost of borrowing. Rates and product terms can also change over the life of the loan, which can shift the picture relative to this fixed-snapshot estimate.