How the cost is worked out
Both loans use the same monthly payment formula: the loan times the monthly rate, divided by one minus one plus the monthly rate to the power of minus the number of months. For the fixed loan that is $400,000 times 0.065 divided by 12, divided by one minus 1.0054167 to the power of −360, which is $2,528.27 a month. Multiply by 360 months and the total is $910,177.95; subtract the $400,000 borrowed and the interest is $510,177.95. The variable loan uses the same formula, but the rate changes every year: each year the payment is recalculated on the remaining balance over the remaining term at that year’s rate. Year 1 at 5.75% is $2,334.29 a month; year 6 at 6.25% is $2,447.69; year 7 at 6.75% is $2,560.36. Add up every year’s interest and the variable loan costs $705,927.56 of interest and $1,105,927.56 in total. The difference is the two totals subtracted: $1,105,927.56 minus $910,177.95 is $195,749.61.
The worked example, line by line
Setup: $400,000 borrowed, 30 years, fixed 6.50%, variable starting at 5.75% and rising 0.50 points a year from year 6, capped at 10.75%.
Line 1 — fixed monthly rate. 6.50% divided by 12 is 0.54167% a month.
Line 2 — fixed payment. $400,000 times 0.0054167, divided by one minus 1.0054167 to the power of −360, is $2,528.27 a month.
Line 3 — fixed total and interest. $2,528.27 times 360 is $910,177.95 in total; minus $400,000 is $510,177.95 of interest.
Line 4 — variable first payment. $400,000 at 5.75% over 30 years is $2,334.29 a month — $193.98 below the fixed payment.
Line 5 — year 6 payment. After five years at 5.75%, the balance is lower and the rate is 6.25%; re-amortized over the remaining 25 years, the payment is $2,447.69 a month.
Line 6 — year 7, the break-even year. At 6.75% the payment is $2,560.36 a month — the first payment above the fixed $2,528.27, by $32.09.
Line 7 — variable totals. Adding every year’s interest gives $705,927.56 of interest and $1,105,927.56 in total.
Line 8 — the difference. $1,105,927.56 minus $910,177.95 is $195,749.61 more for the variable loan.
The variable payment, year by year
At the defaults, the variable rate holds at 5.75% for five years, then rises 0.50 points a year until the 10.75% cap in year 15. The payment is recalculated every year on the remaining balance over the remaining term.
| Year | Rate | Monthly payment | Interest that year |
|---|
| 1 | 5.75% | $2,334.29 | $22,865.79 |
| 2 | 5.75% | $2,334.29 | $22,561.99 |
| 3 | 5.75% | $2,334.29 | $22,240.25 |
| 4 | 5.75% | $2,334.29 | $21,899.52 |
| 5 | 5.75% | $2,334.29 | $21,538.67 |
| 6 | 6.25% | $2,447.69 | $23,010.35 |
| 7 | 6.75% | $2,560.36 | $24,423.80 |
| 8 | 7.25% | $2,672.05 | $25,776.79 |
| 9 | 7.75% | $2,782.54 | $27,066.11 |
| 10 | 8.25% | $2,891.59 | $28,287.52 |
After year 10 the rate keeps rising 0.50 points a year — 8.75% in year 11, 9.25% in year 12, 9.75% in year 13, 10.25% in year 14 — and reaches the 10.75% cap in year 15, when the payment is $3,407.17 a month. From year 15 on, the rate stays at 10.75% and the payment falls slowly as the balance shrinks.
Every branch, checked
Rates stay flat at 5.75% for all 30 years: the payment never changes — $2,334.29 a month for 360 months. The interest is $440,344.91 and the total is $840,344.91, so the variable loan wins by $69,833.04 against the fixed loan’s $510,177.95 of interest. This is the best case for the variable loan, and it only happens if rates never rise at all.
Rates rise fast — 1.00 points a year from year 6 to the cap: the rate hits the 10.75% cap in year 10 instead of year 15, and the interest climbs to $762,838.34 — $56,910.78 more than the 0.50-point rise, and $252,660.39 more than the fixed loan’s interest. A faster rise punishes the variable loan twice: the payment jumps sooner, and the higher rate applies to a larger remaining balance.
A 15-year fixed loan at 6.00%: the payment is $3,375.43 a month — $847.16 more than the 30-year fixed — but the interest is only $207,576.92, which is $302,601.03 less than the 30-year fixed loan’s $510,177.95. The shorter term is the cheapest loan on this page by a wide margin, if the monthly payment fits the budget.
The cap year: at the defaults the variable rate reaches the 10.75% cap in year 15, when the payment is $3,407.17 a month — $878.90 above the fixed payment. The cap is the worst the payment can ever be in this model, and it arrives in year 15, halfway through the loan.
The honest flip: when variable wins
Variable wins when rates stay low. If the rate never rises above 5.75%, the variable loan costs $440,344.91 of interest against the fixed loan’s $510,177.95 — a saving of $69,833.04, or $193.98 a month for 30 years. Variable also wins if you sell or refinance before the rate climbs: the first six years at 5.75% save $193.98 a month against fixed, and the payment only passes the fixed one in year 7. The flip is real but narrow — it needs rates to stay flat or the loan to end early. In the default scenario, where the rate rises 0.50 points a year from year 6, fixed wins by $195,749.61, and the longer you stay in the loan, the wider the fixed loan’s lead gets.
What the defaults assume
The defaults are a comparison, not a rate forecast: fixed at 6.50% and variable starting at 5.75% with a 0.50-point yearly rise from year 6 and a 10.75% lifetime cap. The model re-amortizes the variable loan every year on the remaining balance over the remaining term, which is how a real adjustable-rate payment is set at each adjustment. It counts principal and interest only — no taxes, insurance, PMI, or fees — so the totals are the loan cost, not the full monthly housing cost. The fixed payment is constant for the whole term, and the variable payment changes only once a year, on the anniversary.
Rounding convention, stated plainly: payments are shown rounded to cents — $2,528.27, $2,334.29 — but the totals use the unrounded payment, so $2,528.27 times 360 is $910,177.95 rather than $910,177.20. Interest figures are the unrounded yearly interest added up, then rounded to cents. The difference is the rounded totals subtracted: $1,105,927.56 minus $910,177.95 is $195,749.61.
Output · formula · meaning
| Output | Formula | What it means |
|---|
| Fixed payment | $400,000 × 0.065/12 / (1 − 1.0054167^−360) | $2,528.27 a month, every month for 30 years. |
| Fixed total interest | $2,528.27 × 360 − $400,000 | $510,177.95 of interest over the loan. |
| Fixed total paid | $2,528.27 × 360 | $910,177.95 in total. |
| Variable first payment | $400,000 at 5.75% over 30 years | $2,334.29 a month for years 1–5. |
| Variable year 7 payment | Re-amortized at 6.75% over 24 years | $2,560.36 a month — the break-even year. |
| Variable total interest | Sum of all 30 years’ interest | $705,927.56 of interest over the loan. |
| Variable total paid | $705,927.56 + $400,000 | $1,105,927.56 in total. |
| Variable costs more by | $1,105,927.56 − $910,177.95 | $195,749.61 more than fixed. |
| Flat-rate variable interest | $2,334.29 × 360 − $400,000 | $440,344.91 — variable wins by $69,833.04. |
| Fast-rise variable interest | +1.00 points a year to the cap | $762,838.34 of interest. |
| 15-year fixed payment | $400,000 at 6.00% over 15 years | $3,375.43 a month. |
| 15-year fixed interest | $3,375.43 × 180 − $400,000 | $207,576.92 of interest. |
| Cap-year payment | Re-amortized at 10.75% over 16 years | $3,407.17 a month in year 15. |
| Year 6 payment | Re-amortized at 6.25% over 25 years | $2,447.69 a month. |
| Year 8 payment | Re-amortized at 7.25% over 23 years | $2,672.05 a month. |
Who uses this
- The first-time buyer: borrows $400,000 and learns the fixed loan costs $910,177.95 in total while the variable loan costs $1,105,927.56 at the defaults — the $193.98 a month the variable loan saves at first is not worth $195,749.61 over 30 years.
- The rate gambler: believes rates will fall and learns the variable loan only wins if the rate stays flat at 5.75% — then it saves $69,833.04 — while a 1.00-point yearly rise costs $762,838.34 of interest instead.
- The 15-year borrower: can afford $3,375.43 a month and learns the 15-year fixed loan at 6.00% costs only $207,576.92 of interest — $302,601.03 less than the 30-year fixed — and owns the home outright in half the time.
- The refinancer: plans to sell or refinance within six years and learns the variable loan saves $193.98 a month for the first five years and only passes the fixed payment in year 7 at $2,560.36 — the short stay is the one case where variable clearly pays.
Accuracy & limitations
The math is exact for the numbers you enter: the fixed payment is the standard amortization formula, and the variable payment is the same formula re-applied every year on the remaining balance over the remaining term at that year’s rate. But the adjustment model is simplified on purpose. A real adjustable-rate mortgage has an initial fixed period — often 5, 7, or 10 years — and then adjusts on a set schedule, usually once a year, with a periodic cap that limits how much the rate can move at one adjustment, typically 2 points, and a lifetime cap. The rate itself is an index, such as the Secured Overnight Financing Rate, plus a margin set by the lender, so it moves with the market rather than rising by a fixed amount each year. This calculator replaces all of that with a simple rule — the rate rises by the amount you enter each year after the first-adjustment year, up to the cap — so it shows the shape of the cost, not a forecast of any real loan’s payments. It also counts principal and interest only: no property taxes, homeowner’s insurance, PMI, or closing costs, which a real monthly payment includes. The totals use the unrounded payment, so the displayed payment times the number of months can differ by a few cents from the displayed total.
Cite this calculatorBright Side Kit. “Fixed vs Variable Mortgage Calculator: 30-Year Cost.” brightoolbox.com, 2026. Method: monthly payment = loan × (monthly rate) / (1 − (1 + monthly rate)^−months); the variable loan is re-amortized every year on the remaining balance over the remaining term at that year’s rate. Defaults: $400,000, 30 years, fixed 6.50%, variable starting 5.75%, +0.50 points a year from year 6, cap 10.75% → fixed $2,528.27 a month, $510,177.95 interest, $910,177.95 total; variable $705,927.56 interest, $1,105,927.56 total, $195,749.61 more; break-even year 7 at 6.75% / $2,560.36. Branches: flat 5.75% $440,344.91 interest, variable wins by $69,833.04; fast rise +1.00 points a year $762,838.34 interest; 15-year fixed 6.00% $3,375.43 a month, $207,576.92 interest. Totals use the unrounded payment.Bright Side Kit. "Fixed vs Variable Mortgage Calculator: 30-Year Cost" https://brightoolbox.com/fixed-vs-variable-mortgage/ Accessed October 24, 2026.
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