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ARM vs. Fixed-Rate Mortgage

A fixed rate mortgage has the same payment for the entire term of the loan. An adjustable rate mortgage (ARM) has a rate that can change, causing your monthly payment to increase or decrease. Use this calculator to compare a fixed rate mortgage to a Fully Amortizing ARM.

ARM vs. Fixed-Rate Mortgage Definitions

Fixed Rate Mortgage
A fixed-rate mortgage has the same interest rate and monthly payment throughout the term of the mortgage.
Fully Amortizing ARM
This calculator shows a "fully amortizing" ARM, which is the most common type of ARM. The monthly payment is calculated to pay off the entire mortgage balance at the end of a 30-year term. After the initial period, the interest rate and monthly payment adjust at the frequency specified. The amount an ARM can adjust each year, and over the life of the loan, are typically capped. Below is a list of common ARMs.

Common Adjustable Rate Mortgages
ARM TypeMonths Fixed
10/1 ARMFixed for 120 months, adjusts annually for the remaining term of the loan.
7/1 ARMFixed for 84 months, adjusts annually for the remaining term of the loan.
5/1 ARMFixed for 60 months, adjusts annually for the remaining term of the loan.
3/1 ARMFixed for 36 months, adjusts annually for the remaining term of the loan.
Mortgage amount
Original or expected balance for your mortgage.
Term in years
The number of years over which you will repay this loan. Common fixed-rate mortgage terms are 15, 20 and 30 years.
Expected adjustment
The annual adjustment you expect in your ARM, after the initial period ends. The range for this calculator is minus 3% to plus 3%. Use a negative value if you believe interest rates will decrease, a positive value if you believe they will increase.
Interest rate
Annual interest rate for each mortgage type. Typically an ARM will have a lower initial interest rate than a fixed-rate mortgage. Please note that the interest rate is different from the Annual Percentage Rate (APR), which includes other expenses such as mortgage insurance, and the origination fee and or point(s), which were paid when the mortgage was first originated. The APR is normally higher than the simple interest rate.
Months rate fixed
This is the number of months the rate is fixed for an ARM. During this period the interest rate and the monthly payment will remain fixed. The rate will then adjust annually by the amount entered in the "Expected Adjustment" field.
Interest rate cap
This is the highest allowable interest rate for your mortgage. Your interest rate can never be adjusted above this rate.
Monthly payment
Monthly principal and interest payment (PI) for the fixed-rate mortgage and the fully amortizing ARM.