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Certainty or a cheaper start?
Loan amount, both rates, the ARM’s fixed period and caps, and how long you’ll keep the loan — the full head-to-head.
X VS Y COMPARISON · MONEY
Fixed vs Adjustable Mortgage
An ARM starts cheaper and can jump; a fixed rate costs more and never moves. The honest question isn’t which is “better” — it’s when you’ll leave the loan and whether you could carry the worst-case adjusted payment. Enter your numbers and this calculator runs both: the ARM’s fixed-period savings, the maximum first-adjustment shock under your caps, and the total-cost verdict over your hold.
What the comparison shows
On a $400,000 loan at 6.84% fixed vs a 5-year ARM starting at 6.15% (2/1/5 caps), the fixed payment is $2,618/mo and the ARM starts at $2,437/mo. Over the 5-year teaser that saves $10,887. Then the stress test: the worst legal first adjustment takes the ARM to 8.15%, and the payment jumps to $2,915/mo — a $478.35/mo shock. Over a 7-year hold the fixed loan costs $219,943 in payments and the worst-case ARM costs $216,181, so the ARM still comes out $3,762 ahead even if rates max out at the first reset. Sell or refinance before the adjustment and the savings are pure; stay decades and the fixed loan’s certainty usually wins.
Output · formula · meaning
| Output | Formula | What it means |
|---|---|---|
| Fixed payment | amortize loan @ fixed ÷ 360 mo | Your payment if it never changes: $2,618/mo here. |
| ARM starting payment | amortize loan @ teaser ÷ 360 mo | What you pay during the teaser: $2,437/mo — the reason ARMs exist. |
| Worst-case adjusted payment | remaining balance @ (teaser + min(first cap, life cap)) | The maximum legal first jump: $2,915/mo at 8.15%. Budget for this payment, not the teaser. |
| Total over your hold | fixed pmts vs ARM pmts + worst-case pmts | The verdict, in dollars: $3,762 apart over 7 years. |
Who uses this
- Starter-home buyers: you know you’ll move in 5–7 years — the ARM’s teaser savings with the reset risk priced in.
- Relocation buyers: a known job move in year 6 makes the ARM nearly free savings; an uncertain timeline argues for fixed.
- Rate-watchers: betting rates fall and you’ll refinance — the model shows what happens if that bet is wrong.
- First-time buyers on tight budgets: if the worst-case payment would break you, the calculator says fixed, loudly.
Accuracy & limitations
Rates are late-2026 averages for a 740-FICO borrower with 20% down (30-yr fixed ~6.84%, 5/6 ARM teaser ~6.15%, roughly 70 bps apart); your quotes will differ. The industry-standard cap structure is 2/1/5 (2 points at first adjustment, 1 per period after, 5 lifetime); the index is usually 30-day SOFR plus a ~2.50% margin. The model amortizes the ARM over 30 years, re-amortizes the remaining balance at the worst-case first adjustment, and holds it flat afterward — it does not model later periodic adjustments, rate drops, taxes, insurance, PMI, or refinance closing costs. ARMs were about 12–14% of 2026 originations: mainstream, not exotic, but a plan, not a hope.
Cite this calculatorBright Side Kit. “Fixed vs Adjustable Mortgage.” brightoolbox.com, 2026.
Bright Side Kit. "Fixed vs Adjustable Mortgage." https://brightoolbox.com/fixed-vs-adjustable-mortgage/ Accessed October 22, 2026.Frequently asked questions
Is an ARM worth it in 2026?
It can be — with the 30-year fixed near 6.8–7.4% and 5/6 ARM teasers roughly 70 basis points lower, a borrower who sells or refinances before the fixed period ends pockets real savings (about $10,887 over 5 years on a $400,000 loan at 6.84% vs 6.15%). It is a bet on your timeline: if you stay decades, the fixed loan’s certainty usually wins.
What happens when my ARM adjusts?
The lender takes the ARM’s index (usually 30-day SOFR), adds your fixed margin (~2.50%), and that becomes your new rate — subject to your caps. On a standard 2/1/5 ARM, the first adjustment can rise at most 2 points (so 6.15% becomes at most 8.15%), then at most 1 point per period, never more than 5 above the start rate. Your payment is recalculated on the remaining balance.
What is the worst-case ARM payment I should budget for?
Model the maximum legal first adjustment: teaser rate + first-adjustment cap (capped by the lifetime cap), applied to your remaining balance over the remaining term. On the $400k example above, that is 8.15% and $2,915/mo — $478 more than the $2,437 teaser payment. If that payment would strain your budget, take the fixed loan.
5/6, 7/6, or 10/6 ARM — which should I pick?
Match the fixed period to your exit: 5/6 for a confident sub-5-year stay (cheapest teaser), 7/6 for the 5-to-9-year window, 10/6 if the move is a decade out. Longer fixed periods cost a slightly higher starting rate — you are buying two more years of certainty.
Can I refinance out of an ARM before it adjusts?
Usually yes, and that is the standard ARM playbook — but refinancing is not free (expect 1–2% of the loan in closing costs) and not guaranteed: if rates rose, your income fell, or your home lost value, the refi you counted on may not exist. Never take an ARM you could not afford to keep.