Fixed vs ARM Mortgage Calculator
Compare a fixed-rate mortgage against an adjustable-rate mortgage (ARM) for your home price and loan amount. See exactly when each option wins based on how long you plan to stay.
Loan: $360,000
Rate never changes for the life of the loan
How to Read the Numbers
The holding period slider is the most important input — it determines how long the ARM has to save you money before rate adjustments potentially reverse the advantage. The break-even point is the month when cumulative fixed payments would have been cheaper. If you move before that month, the ARM wins.
The amber uncertainty band on the cost chart shows the spread between an optimistic (rates fall slightly) and pessimistic (rates rise slightly) ARM scenario — useful for visualizing your exposure.
Key Factors in This Decision
- How long you'll stay: The single biggest variable. If your timeline is shorter than the ARM's fixed period (e.g. 5/1 ARM, move in 4 years), the ARM is nearly risk-free.
- Income stability: ARMs reward financial flexibility. If your income is variable or your job is uncertain, a fixed payment removes one source of stress.
- Rate environment: Taking an ARM near a historic rate peak means adjustments are more likely to be flat or downward. Taking one near historic lows carries more upside rate risk.
- Your risk tolerance: The fixed rate buys certainty at a premium. If budgeting tightly or you dislike payment unpredictability, that premium is often worth it.
How Future Rates Affect Your ARM
After the fixed period ends, your rate adjusts annually — capped by the per-period cap (e.g. ±2%/yr) and the lifetime cap (e.g. +5% from start). In a rising rate environment, your payment could increase by hundreds of dollars per year for several years before hitting the ceiling.
The heat map on the right shows exactly how your outcomes change across different rate trajectories and holding periods. Cells turning red indicate when staying long with a rising-rate ARM becomes more expensive than a fixed mortgage.
ARMs in a Recession
During a recession, the Federal Reserve typically cuts the federal funds rate to stimulate the economy — and ARM rates often follow. This means your ARM payment could actually decrease during an economic downturn, unlike a fixed mortgage.
However, recessions also bring layoffs and income uncertainty, which makes a predictable fixed payment more valuable for financial stability. The "optimistic" rate scenario in this calculator roughly models a mild recession environment.
What Refinancing Means
Refinancing replaces your current mortgage with a new one — usually at a different rate or term. With an ARM, many borrowers plan to refinance into a fixed-rate loan before the adjustable period begins. This strategy captures the ARM's lower initial rate, then locks in certainty later.
The catch: refinancing costs 1–3% of the loan balance in closing costs. You need to stay long enough after the refi to recover those costs — typically 2–4 years. Use the "What if you refinance?" section above to model this exact scenario with your numbers.
How long do you plan to stay?
7 yearsARM saves you
$17,255
total over 7 years · neutral rate scenario
ARM Total
$179k
Fixed Total
$196k
Difference
$17k
ARM stays cheaper than fixed for the entire 30-year term
ARM Saves (First 5 yrs)
+$12,325
ARM Payment After Yr 5
$2,130
at 5.88%
Fixed Cheaper From
Never
neutral scenario
Total Interest Paid Over 7 Years
Fixed
$162,971
ARM (neutral)
$140,858
ARM saves $22,113 in interest
ARM wins at 7 years
ARM is cheaper if you move before year —. At your planned 7 years, you save $17k. Risk: rates could rise $1,119/mo at the lifetime cap.
Estimate only — not financial advice.
Payment Risk Analysis
Worst-case ARM
$3,248/mo
at 10.88% (lifetime cap)
+$1,119/mo from initial (53%)
Best-case ARM
$1,742/mo
at 3.88%
Fixed: $2,335/mo — locked
Cumulative Total Cost
Amber band = uncertainty cone (optimistic to pessimistic ARM). Purple dashed = your planned holding period.
Under What Conditions Does Each Mortgage Win?
Green = ARM cheaper · Red = Fixed cheaper · Your scenario is highlighted
| Hold / Rate Δ | -1%/yr | -0.5%/yr | 0%/yr | +0.5%/yr | +1%/yr | +1.5%/yr | +2%/yr | +3%/yr |
|---|---|---|---|---|---|---|---|---|
| 2yr | ARM $5k | ARM $5k | ARM $5k | ARM $5k | ARM $5k | ARM $5k | ARM $5k | ARM $5k |
| 3yr | ARM $7k | ARM $7k | ARM $7k | ARM $7k | ARM $7k | ARM $7k | ARM $7k | ARM $7k |
| 5yr | ARM $12k | ARM $12k | ARM $12k | ARM $12k | ARM $12k | ARM $12k | ARM $12k | ARM $12k |
| 7yr | ARM $24k | ARM $21k | ARM $17k | ARM $14k | ARM $10k | ARM $6k | ARM $2k | ARM $2k |
| 10yr | ARM $57k | ARM $41k | ARM $25k | ARM $6k | Fixed $13k | Fixed $25k | Fixed $30k | Fixed $30k |
| 15yr | ARM $124k | ARM $93k | ARM $37k | Fixed $29k | Fixed $65k | Fixed $77k | Fixed $84k | Fixed $84k |
| 20yr | ARM $191k | ARM $155k | ARM $49k | Fixed $75k | Fixed $116k | Fixed $130k | Fixed $137k | Fixed $137k |
| 30yr | ARM $325k | ARM $279k | ARM $74k | Fixed $167k | Fixed $218k | Fixed $235k | Fixed $244k | Fixed $244k |
Remaining Loan Balance Over Time
Lower balance = more equity. Dashed lines = rate extremes (worst/best case).
Amortization Comparison — Milestone Years
| Year | Fixed Balance | Fixed Payment | ARM Balance | ARM Payment | ARM Rate |
|---|---|---|---|---|---|
| 1 | $356,163 | $2,335 | $355,475 | $2,130 | 5.88% |
| 3 | $347,670 | $2,335 | $345,589 | $2,130 | 5.88% |
| 5adjusts | $337,953 | $2,335 | $334,474 | $2,130 | 5.88% |
| 7 | $326,835 | $2,335 | $321,976 | $2,130 | 5.88% |
| 10 | $307,084 | $2,335 | $300,257 | $2,130 | 5.88% |
| 15 | $263,864 | $2,335 | $254,389 | $2,130 | 5.88% |
| 20 | $203,350 | $2,335 | $192,904 | $2,130 | 5.88% |
| 25 | $118,625 | $2,335 | $110,483 | $2,130 | 5.88% |
| 30 | $0 | $2,335 | $0 | $2,130 | 5.88% |
Want the full picture — taxes, buy vs rent comparison, and net worth projection?
See full affordability analysis →