Fixed vs Variable Rate Loan: Compare Interest & Payments

What does the fixed loan winning by $42,096.75 mean?

It means that over the first 10 years, the fixed loan costs $42,096.75 less in interest than the variable loan — $181,872.87 against $223,969.62 — because the variable rate passes the fixed rate in year 3 and keeps rising to its 10.50% cap. The variable loan pays $1,750.72 a month in year 1, then $1,845.01, $1,939.30, $2,033.42, $2,127.19, $2,220.47, $2,313.09, $2,404.91, $2,495.77 and $2,585.50 a month by year 10, against the fixed loan's $1,896.20 a month throughout. The variable loan also pays $33,040.00 more in total over the 10 years, and it owes $9,056.75 more at the end of them — $263,385.13 against $254,328.38 — because the fixed loan repays principal faster while the variable loan is at its low rate. The winner is decided by interest, not by total paid, because the two loans repay different amounts of principal.

Three things to check before you trust the number

The horizon decides the winner. Over 1 year the variable loan wins by $2,251.93, over 4 years it still wins by $200.99, over 5 years the fixed loan wins by $3,367.02, and over 30 years the fixed loan wins by $209,051.23 — the variable rate keeps charging after the horizon ends. If you will sell or refinance within four years, the variable loan's low start is nearly free money; if you will stay for the full term, the fixed loan's certainty is worth more.

The step is the whole story. With a step of 0% the variable rate never moves and the variable loan wins by $22,426.19; with a step of 0.25% the fixed loan wins by $9,548.05; with a step of 1.00% it wins by $76,494.12. The largest start rate for the variable loan to still win is 4.25% — at 4.50% the fixed loan wins by $3,831.03 — and the largest cap for it to still win is 6.50%.

Interest, not paid, is the fair comparison. The fixed loan pays $227,544.49 over 10 years and the variable loan $260,584.49 — a gap of $33,040.00 — but $9,056.75 of that gap is principal the fixed loan repaid and the variable loan still owes. The interest gap of $42,096.75 is the true saving, and it is the number the winner is decided on.

Worked example

On the defaults: $300,000, fixed 6.50% over 30 years against a variable loan starting at 5.75%, stepping 0.50% a year up to 10.50%, over a 10-year horizon.

1. Fixed payment: $300,000 at 6.50% over 360 months is $1,896.20 a month (unrounded 1896.204070).
2. Variable first payment: $300,000 at 5.75% over 360 months is $1,750.72 a month (unrounded 1750.718569).
3. Variable rate by year: 5.75% in year 1, 6.25% in year 2, 6.75% in year 3, 7.25% in year 4, 7.75% in year 5, 8.25% in year 6, 8.75% in year 7, 9.25% in year 8, 9.75% in year 9, 10.25% in year 10 — it passes the fixed rate in year 3.
4. Variable payment in year 10: the balance re-amortized at 10.25% over the remaining 21 years is $2,585.50 a month (unrounded 2585.502733).
5. Interest over 10 years: fixed $181,872.87 (unrounded 181872.867547), variable $223,969.62 (unrounded 223969.621738) — the fixed loan wins by $42,096.75 (unrounded 42096.754191).
6. Largest variable start rate for the variable loan to still win: 4.25% — at 4.25% the variable loan wins by $3,755.41 (unrounded 3755.413761), and at 4.50% the fixed loan wins by $3,831.03 (unrounded 3831.029883).
7. Largest horizon for the variable loan to still win: 4 years — at 4 years the variable loan wins by $200.99 (unrounded 200.986906), and at 5 years the fixed loan wins by $3,367.02 (unrounded 3367.024678).

Every branch, checked

• horizon 5 years: horizon 5 years: Fixed $1,896.20/mo; variable $1,750.72/mo in year 1, $2,127.19/mo in year 5; Fixed wins by $3,367.02 interest over 5 years. horizon 5 years — the fixed loan wins by $3,367.02 of interest, because the variable rate passes the fixed rate in year 3, so even a 5-year horizon is enough for the fixed loan to pull ahead.
• horizon 30 years: horizon 30 years: Fixed $1,896.20/mo; variable $1,750.72/mo in year 1, $2,629.58/mo in year 30; Fixed wins by $209,051.23 interest over 30 years. horizon 30 years — the fixed loan wins by $209,051.23, because over the full term the variable rate spends twenty years at or near its cap.
• step 0%: step 0%: Fixed $1,896.20/mo; variable $1,750.72/mo in year 1, $1,750.72/mo in year 10; Variable wins by $22,426.19 interest over 10 years. step 0% — the variable rate never moves, so the variable loan wins by $22,426.19 — the step is the whole story.
• cap 7.00%: cap 7.00%: Fixed $1,896.20/mo; variable $1,750.72/mo in year 1, $1,986.12/mo in year 10; Fixed wins by $7,556.10 interest over 10 years. cap 7.00% — the fixed loan wins by $7,556.10, because capping the rate early keeps the variable loan close but not ahead.
• variable start 6.50%: variable start 6.50%: Fixed $1,896.20/mo; variable $1,896.20/mo in year 1, $2,666.78/mo in year 10; Fixed wins by $63,906.51 interest over 10 years. variable start 6.50% — the fixed loan wins by $63,906.51, because with no low start the variable loan has nothing to save.
• fixed rate 5.50%: fixed rate 5.50%: Fixed $1,703.37/mo; variable $1,750.72/mo in year 1, $2,585.50/mo in year 10; Fixed wins by $71,942.61 interest over 10 years. fixed rate 5.50% — the fixed loan wins by $71,942.61, because a fixed rate below the variable start beats it outright.
• loan $200,000: loan $200,000: Fixed $1,264.14/mo; variable $1,167.15/mo in year 1, $1,723.67/mo in year 10; Fixed wins by $28,064.50 interest over 10 years. loan $200,000 — the fixed loan wins by $28,064.50, the same shape at a smaller size.
• term 15 years: term 15 years: Fixed $2,613.32/mo; variable $2,491.23/mo in year 1, $3,032.21/mo in year 10; Fixed wins by $29,320.76 interest over 10 years. term 15 years — the fixed loan wins by $29,320.76, because a shorter term means higher payments and less time at the variable cap.
• step 1.00% a year: step 1.00% a year: Fixed $1,896.20/mo; variable $1,750.72/mo in year 1, $2,684.85/mo in year 10; Fixed wins by $76,494.12 interest over 10 years. step 1.00% a year — the fixed loan wins by $76,494.12, because the rate hits its cap in year 6.
• fractional inputs: fractional inputs: Fixed $1,906.08/mo; variable $1,760.26/mo in year 1, $2,651.85/mo in year 10; Fixed wins by $48,165.82 interest over 10 years. fractional inputs — loan $300,000.50 at 6.55% / 5.80%, step 0.55%, cap 10.55%, the fixed loan wins by $48,165.82, the same shape to the cent.

The reverses, worked backwards

• Largest variable start rate for the variable interest to stay no more than the fixed interest: 4.25% — at 4.25% the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,475.82 (unrounded 1475.819673)/mo in year 1, $2,247.77 (unrounded 2247.770021)/mo in year 10; Variable wins by $3,755.41 (unrounded 3755.413761) interest over 10 years; at the upper neighbor the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,520.06 (unrounded 1520.055929)/mo in year 1, $2,302.97 (unrounded 2302.971305)/mo in year 10; Fixed wins by $3,831.03 (unrounded 3831.029884) interest over 10 years; at the lower neighbor the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,432.25 (unrounded 1432.245886)/mo in year 1, $2,193.05 (unrounded 2193.046461)/mo in year 10; Variable wins by $11,315.54 (unrounded 11315.537588) interest over 10 years — verdict: STEP.
• Largest lifetime cap for the variable interest to stay no more than the fixed interest: 6.50% — at 6.50% the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,750.72 (unrounded 1750.718569)/mo in year 1, $1,891.90 (unrounded 1891.898051)/mo in year 10; Variable wins by $3,351.09 (unrounded 3351.088312) interest over 10 years; at the upper neighbor the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,750.72 (unrounded 1750.718569)/mo in year 1, $1,939.30 (unrounded 1939.299076)/mo in year 10; Fixed wins by $2,497.35 (unrounded 2497.348671) interest over 10 years; at the lower neighbor the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,750.72 (unrounded 1750.718569)/mo in year 1, $1,845.01 (unrounded 1845.009103)/mo in year 10; Variable wins by $9,183.24 (unrounded 9183.243250) interest over 10 years — verdict: STEP.
• Largest fixed rate for the fixed interest to stay no more than the variable interest: 7.75% — at 7.75% the figures are Fixed $2,149.24 (unrounded 2149.236737)/mo; variable $1,750.72 (unrounded 1750.718569)/mo in year 1, $2,585.50 (unrounded 2585.502733)/mo in year 10; Fixed wins by $4,262.02 (unrounded 4262.017817) interest over 10 years; at the upper neighbor the figures are Fixed $2,201.29 (unrounded 2201.293722)/mo; variable $1,750.72 (unrounded 1750.718569)/mo in year 1, $2,585.50 (unrounded 2585.502733)/mo in year 10; Variable wins by $3,359.74 (unrounded 3359.736578) interest over 10 years; at the lower neighbor the figures are Fixed $2,097.64 (unrounded 2097.643526)/mo; variable $1,750.72 (unrounded 1750.718569)/mo in year 1, $2,585.50 (unrounded 2585.502733)/mo in year 10; Fixed wins by $11,867.44 (unrounded 11867.437310) interest over 10 years — verdict: STEP.
• Largest horizon for the variable interest to stay no more than the fixed interest: 4 years — at 4 years the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,750.72 (unrounded 1750.718569)/mo in year 1, $2,033.42 (unrounded 2033.415024)/mo in year 4; Variable wins by $200.99 (unrounded 200.986906) interest over 4 years; at the upper neighbor the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,750.72 (unrounded 1750.718569)/mo in year 1, $2,127.19 (unrounded 2127.191610)/mo in year 5; Fixed wins by $3,367.02 (unrounded 3367.024677) interest over 5 years; at the lower neighbor the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,750.72 (unrounded 1750.718569)/mo in year 1, $1,939.30 (unrounded 1939.299076)/mo in year 3; Variable wins by $2,336.96 (unrounded 2336.961143) interest over 3 years — verdict: STEP.
• Largest variable start rate for the year-1 payment to stay at or below $1,800: 6.00% — at 6.00% the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,798.65 (unrounded 1798.651575)/mo in year 1, $2,643.19 (unrounded 2643.188594)/mo in year 10; Fixed wins by $49,805.05 (unrounded 49805.053164) interest over 10 years; at the upper neighbor the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,847.15 (unrounded 1847.151601)/mo in year 1, $2,655.17 (unrounded 2655.165692)/mo in year 10; Fixed wins by $56,852.11 (unrounded 56852.111043) interest over 10 years; at the lower neighbor the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,750.72 (unrounded 1750.718569)/mo in year 1, $2,585.50 (unrounded 2585.502733)/mo in year 10; Fixed wins by $42,096.75 (unrounded 42096.754191) interest over 10 years — verdict: STEP.
• Smallest annual step for the variable full-term interest to reach at least the fixed full-term interest: 0.25% — at 0.25% the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,750.72 (unrounded 1750.718569)/mo in year 1, $2,149.00 (unrounded 2148.998058)/mo in year 10; Fixed wins by $9,548.05 (unrounded 9548.053786) interest over 10 years; at the lower neighbor the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,750.72 (unrounded 1750.718569)/mo in year 1, $1,750.72 (unrounded 1750.718569)/mo in year 10; Variable wins by $22,426.19 (unrounded 22426.192826) interest over 10 years; at the upper neighbor the figures are Fixed $1,896.20 (unrounded 1896.204070)/mo; variable $1,750.72 (unrounded 1750.718569)/mo in year 1, $2,585.50 (unrounded 2585.502733)/mo in year 10; Fixed wins by $42,096.75 (unrounded 42096.754191) interest over 10 years — verdict: STEP.

What the defaults assume

The defaults are a $300,000 loan, fixed 6.50% over 30 years against a variable loan starting at 5.75%, stepping 0.50% a year up to a 10.50% cap, compared over 10 years — the most common fixed-versus-variable choice in 2026, with the fixed loan winning by $42,096.75 of interest over the horizon and by $209,051.23 over the full term. They are a starting point, not a benchmark: your loan may be $200,000, your step 1.00% a year, your horizon 5 — and the right answer for you is the one your numbers describe. Change the loan, the rates, the step, the cap, the term and the horizon to your own and the calculator recomputes instantly. Compare interest over the horizon you will actually hold the loan, and remember the winner flips when the horizon grows.

These notes repeat in every explainer section because this page is built to be read start to finish: the defaults are one comparison, not a standard; the horizon decides the winner; the step is the whole story; and interest, not paid, is the fair comparison.

Output · formula · meaning

Who uses this

• A borrower choosing between a fixed loan and a variable one — over 10 years the fixed loan wins by $42,096.75 of interest, but over 1 year the variable loan wins by $2,251.93, so the choice turns on how long they will hold it.
• A homebuyer planning to sell in four years — the variable loan still wins by $200.99, but at five years the fixed loan wins by $3,367.02, so the sale date is the decision.
• A refinancer weighing a shorter term — a 15-year term means the fixed loan wins by $29,320.76, because a shorter term means less time at the variable cap.
• A financial planner showing a client the trade-off — the largest start rate for the variable loan to still win is 4.25%, and at 4.50% the fixed loan wins by $3,831.03.

Accuracy & limitations

The calculator uses the closed-form amortization formula for the fixed leg — the payment that amortizes the loan exactly, and the balance after any number of months — and a month-by-month schedule for the variable leg, re-amortizing the payment every year at the new rate — and every figure on this page is checked against an iterative schedule to the cent, and against an independent model. What it cannot do is predict the variable rate: it takes the step and the cap you give it and applies them mechanically, so a real variable loan with an index, a margin and periodic caps will move differently — if your rate adjusts with an index rather than a fixed step, this is a what-if, not a forecast. It also leaves out taxes, insurance, PMI and closing costs, so the comparison is principal and interest only — the mortgage calculator adds the rest. And the page prints the unrounded figures so the rounding does not mislead you — the fixed payment is $1,896.20, unrounded 1896.204070, and the interest gap is $42,096.75, unrounded 42096.754191.

Cite this calculator

A fixed-rate loan charges one rate for the whole term; a variable-rate loan starts low and steps up every year, up to a lifetime cap, re-amortizing its payment each year over the remaining term. On the defaults — $300,000, fixed 6.50% over 30 years against a variable loan starting at 5.75%, stepping 0.50% a year up to 10.50%, over a 10-year horizon — the fixed payment is $1,896.20 a month, the variable loan pays $1,750.72 a month in year 1 and $2,585.50 a month in year 10, and the fixed loan wins by $42,096.75 of interest over 10 years. Largest variable start rate for the variable loan to still win: 4.25%. Largest lifetime cap for the variable loan to still win: 6.50%. Largest fixed rate for the fixed loan to still win: 7.75%. Largest horizon for the variable loan to still win: 4 years. Largest variable start rate for the year-1 payment to stay at or below $1,800: 6.00%. Smallest annual step for the variable full-term interest to reach at least the fixed full-term interest: 0.25%. Source: Bright Side Kit, brightoolbox.com.

Frequently asked questions