Fixed vs Adjustable Rate Mortgage Calculator 2026?

How the fixed vs adjustable comparison works

A fixed-rate mortgage charges one rate for the whole 30 years, so the payment never moves. An adjustable-rate mortgage (ARM) charges a lower rate for a fixed period — 3, 5, 7, or 10 years — and then adjusts to a new rate, usually once a year, for the rest of the loan. The ARM looks cheaper at the start and riskier later, and this calculator settles the argument with totals: it works out the monthly payment for each loan, the balance still owed when the ARM adjusts, the new payment at the adjusted rate, and what each loan costs over the horizon you pick. The winner is the loan with the lower total paid over that horizon.

At the defaults — a $400,000 loan, 6.50% fixed, a 5.50% ARM fixed for 5 years and then adjusting to 7.50%, compared over 10 years — the fixed payment is $2,528.27 a month and the ARM starts at $2,271.16 a month, which is $257.11 less. After 5 years of ARM payments the balance is $369,842.41, and re-amortizing that balance over the remaining 25 years at 7.50% gives a new payment of $2,733.10 a month, which is $204.83 more than the fixed payment. Over 10 years the fixed loan costs $303,392.65 in payments and the ARM costs $300,255.53, so the ARM saves $3,137.12. The ARM wins, but by only about 1% of what you pay — a small margin for taking on rate risk.

The worked example, line by line

Setup: loan $400,000; fixed rate 6.50%; ARM initial rate 5.50% fixed for 5 years; adjusted rate 7.50%; horizon 10 years; both loans amortized over 30 years.

Line 1 — the fixed payment. Monthly rate 0.065 / 12 = 0.00541667; payment = $400,000 × 0.00541667 × (1.00541667)^360 / ((1.00541667)^360 − 1) = $2,528.27 a month.

Line 2 — the ARM initial payment. Monthly rate 0.055 / 12 = 0.00458333; payment = $400,000 × 0.00458333 × (1.00458333)^360 / ((1.00458333)^360 − 1) = $2,271.16 a month, which is $257.11 less than the fixed payment.

Line 3 — the balance at adjustment. After 60 payments at 5.50%, the balance is $400,000 × (1.00458333)^60 − $2,271.16 × ((1.00458333)^60 − 1) / 0.00458333 = $369,842.41. You have paid off $30,157.59 of the loan in 5 years.

Line 4 — the adjusted payment. Re-amortize $369,842.41 over the remaining 300 months at 7.50%: monthly rate 0.00625, payment = $2,733.10 a month, which is $204.83 more than the fixed payment.

Line 5 — the 10-year totals. Fixed: $2,528.27 × 120 = $303,392.65. ARM: 60 × $2,271.16 + 60 × $2,733.10 = $300,255.53. Difference: $303,392.65 − $300,255.53 = $3,137.12 in the ARM’s favor.

Line 6 — the interest. Fixed interest over 10 years is $303,392.65 − ($400,000 − $339,104.51) = $242,497.16. ARM interest is $300,255.53 − ($400,000 − $339,265.88) = $239,521.41. The ARM pays $2,975.75 less interest, but it also repays $161.37 less principal, so the fixed loan leaves you owing $161.37 less after 10 years.

Line 7 — the break-even. The adjusted rate that makes the 10-year ARM total exactly equal the fixed total is 7.72%, found by bisection. If the ARM adjusts to anything above 7.72%, the fixed loan wins over 10 years.

Every branch, checked

Adjusted rate 6.50%: the ARM payment after adjustment is $2,497.20 a month, and the 10-year ARM total is $286,101.51. The ARM saves $17,291.14 — a much bigger win, because the adjusted rate is no higher than the fixed rate, so the ARM is cheaper in both halves of the decade.

Adjusted rate 9.50%: the ARM payment after adjustment jumps to $3,231.30 a month, and the 10-year ARM total is $330,147.41. The ARM costs $26,754.76 more than the fixed loan. A 4-point jump from the initial rate wipes out the early savings and then some.

7-year fixed period: the ARM stays at 5.50% for 7 years, so the balance at adjustment is lower, $355,263.55, and the new payment at 7.50% is $2,704.94 a month. The 10-year ARM total is $288,154.89, which is $15,237.76 less than the fixed total — a longer cheap period makes the ARM win bigger.

$300,000 loan: the fixed payment is $1,896.20, the ARM starts at $1,703.37 and adjusts to $2,049.83 a month. The 10-year totals are $227,544.49 fixed vs $225,191.65 ARM, so the ARM saves $2,352.84 — the same shape as the $400,000 case, scaled to three quarters.

Fixed rate 5.50%: the fixed payment is $2,271.16, exactly the ARM’s starting payment. When the fixed rate equals the ARM’s initial rate, there is no reason to take the ARM: you get the same payment now and you never face an adjustment.

Reverse — the break-even adjusted rate: 7.72%. That is the number to watch: if you believe the ARM will adjust above 7.72% at the end of its fixed period, take the fixed loan; if you believe it will stay below, the ARM saves money over 10 years.

What the defaults assume

Both loans are 30-year amortizations with no fees, no points, no private mortgage insurance, and no extra payments. The ARM adjusts exactly once, at the end of its fixed period, to the adjusted rate you enter, and then stays at that rate for the rest of the horizon — real ARMs usually adjust every 6 or 12 months after the fixed period, and most have caps that limit how far the rate can move at each adjustment and over the life of the loan, so a real ARM’s second-half payments would move in steps rather than jumping once. The comparison horizon is 10 years: if you sell or refinance sooner, the ARM’s advantage grows, because you keep more of the cheap years and fewer of the expensive ones; if you stay past 10 years, the adjusted rate matters more. Totals are payments made over the horizon, not the full cost of the loan. Rounding convention: money is rounded to cents and all figures are computed from unrounded values, rounded only for display.

Output · formula · meaning

Who uses this

• The buyer who plans to move in 7 years: knows they will sell before year 10, runs the numbers, and learns the ARM saves $3,137.12 over 10 years — and even more over 7 — so the cheap first years are the only years they will ever pay.
• The buyer who will stay 30 years: expects to live in the house for decades, sees the ARM only wins by $3,137.12 over the first 10, and learns the break-even is 7.72% — so one bad adjustment wipes the win out, and the fixed rate is the safer pick.
• The refinancer watching rates: has a 6.50% fixed loan and is offered a 5.50% ARM, and learns the ARM only wins if the adjusted rate stays below 7.72% — so the decision turns on where they think rates will be in 5 years, not on the teaser rate.
• The first-time buyer stretching the budget: can afford $2,271.16 a month but not $2,528.27, and learns the ARM payment jumps to $2,733.10 at 7.50% — so they check whether they can afford the adjusted payment before signing, not just the starting one.

Accuracy & limitations

The math is exact for the numbers you enter: the monthly payment is P·r(1+r)^n/((1+r)^n−1), the balance is P(1+r)^k − PMT·((1+r)^k−1)/r, and the break-even adjusted rate is solved by bisection to within a hundredth of a percent. What the model cannot do is predict the adjusted rate: real ARMs adjust to an index plus a margin, move every 6 or 12 months after the fixed period, and are limited by caps — typically 2% per adjustment and 5% over the life of the loan — so the single jump to 7.50% used here is a simplification of a stepped path. It also ignores closing costs, points, and the tax treatment of mortgage interest. Run the mortgage calculator for the full amortization schedule, and read the fixed vs adjustable rate mortgage guide for the full picture.