ARM vs. Fixed Rate Calculator
Use this side-by-side comparison calculator to discover whether a fixed-rate or adjustable-rate mortgage will better suits your needs.
Estimated monthly payments include principal and interest and are not an offer to lend. Tax, insurance, and other fees and charges may apply. Default interest rate displayed is illustrative only. Interest rates, total cost of mortgage, and monthly mortgage payment are estimates based on information provided. Actual mortgage payment and interest rate may be higher or lower than those displayed and will depend on your mortgage product, collateral, and credit history.
Crunch your own numbers with our mortgage calculators for refinance or a purchase loan, and run as many different scenarios as you’d like.
What it Shows
• Potential payment savings during an ARM's initial fixed period
• Projected future payment scenarios after ARM adjustments begin
• Comparative interest costs and borrowing outcomes over time
What it Doesn't
• Your final lender-approved loan terms or interest rate
• Guaranteed refinance opportunities or eligibility
• Personalized financial, investment, legal, or tax advice
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How the ARM vs. Fixed Calculator Works
Choosing between an ARM and a fixed-rate mortgage involves balancing potentially lower initial payments against long-term payment certainty. This calculator helps you compare both loan options using the same loan amount, term, and ownership timeline.
What the Calculator Compares
The calculator compares key differences between adjustable-rate and fixed-rate mortgages, including monthly payments, interest costs, potential savings during the ARM’s fixed period, and future payment scenarios after adjustments occur.
By evaluating both loan structures side by side, you can better understand the tradeoff between short-term savings and long-term interest rate risk.
Why Dual-Scenario Output Matters
Looking only at today’s interest rate doesn’t tell the full story. An ARM may offer lower payments initially, while a fixed-rate mortgage provides long-term payment stability.
Dual-scenario output allows you to compare both possibilities and see how future rate adjustments could affect your overall borrowing costs.
ARM vs. Fixed in 2026: The Current Landscape
Mortgage borrowers today have several financing options available, each offering a different balance of affordability and predictability.
While fixed-rate mortgages remain the most popular choice, ARMs continue to attract borrowers seeking lower introductory payments and greater short-term savings.
Today's Rates: Fixed vs. 5/6 vs. 7/6 vs. 10/6 ARM
Most modern ARMs offer a lower introductory rate than a comparable fixed-rate mortgage. Common ARM products include 5/6, 7/6, and 10/6 ARMs.
The first number represents the length of the fixed-rate period, while the second indicates how often the rate may adjust once the fixed period ends.
Why the 5/1 ARM Spread Has Collapsed in 2026
Historically, many borrowers selected ARMs because they offered a substantial rate discount compared to 30-year fixed mortgages.
In recent years, that gap has narrowed, causing borrowers to evaluate more carefully whether the potential savings justify the future uncertainty associated with adjustable rates.
When ARMs Still Make Sense
ARMs may make sense for borrowers who expect to sell, refinance, or pay off their mortgage before the initial fixed period expires.
They can also be attractive for borrowers seeking lower initial monthly payments or those who anticipate future income growth that could help offset potential payment increases later.
How to Use the ARM vs. Fixed Calculator (Step-by-Step)
Inputs You'll Need
To compare options accurately, you’ll typically need:
- Loan amount
- Down payment
- Loan term
- Fixed mortgage rate
- ARM introductory rate
- ARM type (5/6, 7/6, or 10/6)
- Expected ownership timeline
- Future rate assumptions
The more accurate your inputs, the more meaningful your comparison will be.
Understanding Your Results
The calculator compares:
- Monthly payments
- Initial ARM savings
- Total interest paid
- Break-even timelines
- Projected future payments
- Potential payment shock
When reviewing results, consider not only the savings available today, but also the potential impact of future adjustments.
ARM Basics: The Terms You Must Understand
The Initial Fixed Period
Every ARM starts with a fixed-rate period during which the interest rate does not change.
For example:
- 5/6 ARM = Fixed for 5 years
- 7/6 ARM = Fixed for 7 years
- 10/6 ARM = Fixed for 10 years
Once this period ends, the loan begins adjusting based on the terms of the mortgage.
SOFR: The Index Behind Modern ARMs
Most modern ARMs are tied to SOFR, or the Secured Overnight Financing Rate.
When an ARM adjusts, the lender uses the applicable SOFR index plus the loan’s margin to calculate the new interest rate.
Because SOFR can move higher or lower over time, future ARM rates may also change.
Margin: What Your Lender Adds
The margin is a fixed percentage assigned when your mortgage is originated.
Future ARM rates are generally calculated using:
SOFR + Margin = New Interest Rate
Unlike the index, the margin does not change throughout the life of the loan.
Rate Caps: Initial, Periodic, and Lifetime
Rate caps help limit future increases in ARM interest rates.
Initial Cap — Limits how much the rate can increase at the first adjustment.
Periodic Cap — Limits how much the rate can change during each future adjustment period.
Lifetime Cap — Sets the maximum interest rate increase allowed over the life of the loan.
These limits help protect borrowers from extreme rate increases and sudden payment changes.
Payment Shock: The Worst-Case Scenario Your Lender Won't Volunteer
One of the most important considerations when choosing an ARM is understanding payment shock.
Payment shock occurs when your interest rate increases after the fixed period ends, causing your monthly payment to rise.
How Payment Shock Is Calculated
Payment shock is calculated by comparing your original ARM payment to the payment after future rate adjustments occur.
The larger the increase in interest rate, the greater the potential increase in your monthly mortgage payment.
Borrowers should evaluate both expected and worst-case scenarios before selecting an ARM.
Common ARM Types Explained (2026 Standard)
5/6 SOFR ARM
A 5/6 ARM provides a fixed interest rate for the first five years before adjusting every six months thereafter.
This option often offers the lowest introductory rate, making it popular among borrowers who expect to move or refinance within a relatively short time frame.
7/6 SOFR ARM
A 7/6 ARM provides seven years of fixed-rate stability before adjustments begin.
Many borrowers view it as a middle-ground option, offering meaningful initial savings while delaying adjustment risk longer than a 5/6 ARM.
10/6 SOFR ARM
A 10/6 ARM provides the longest fixed-rate period among the most common ARM options.
Because of the extended fixed period, rates often sit closer to those of fixed-rate mortgages while still offering potential savings.
When an ARM Beats a Fixed Rate
An ARM may be the better choice when you expect to sell, refinance, or pay off the mortgage before the fixed-rate period ends.
Borrowers who prioritize lower initial monthly payments and have a shorter expected ownership timeline often benefit most from ARM financing. The lower introductory rate may reduce both monthly payments and total interest costs during the time they expect to own the loan.
In situations where the ARM rate is meaningfully lower than the fixed-rate alternative, the savings can outweigh the risk of future adjustments.
When a Fixed Rate Beats an ARM
A fixed-rate mortgage may be the better option when payment stability is your top priority.
Because the interest rate remains unchanged for the life of the loan, borrowers never have to worry about future market conditions affecting their principal and interest payment.
Fixed-rate mortgages are often preferred by long-term homeowners, borrowers with tighter budgets, and anyone who values certainty over potential short-term savings.
ARM Exit Strategies (Sell, Refinance, or Ride It Out)
Many borrowers choose an ARM with a specific plan for what happens before or after the loan begins adjusting.
Sell — Some borrowers expect to move before the fixed period ends, allowing them to take advantage of lower introductory payments without experiencing future adjustments.
Refinance — Others plan to refinance into a new mortgage before adjustments begin. While this strategy can be effective, future interest rates and qualification requirements are never guaranteed.
Ride It Out — Some borrowers choose to keep the ARM after adjustments begin. This approach may work for homeowners with strong income growth, substantial savings, or a greater tolerance for payment fluctuations.
Understanding your likely ownership timeline can help determine whether an ARM or fixed-rate mortgage is the better fit for your situation.
Glossary
Every input and output the calculator uses, explained in plain terms.
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Frequently Asked Questions
What is an adjustable-rate mortgage (ARM)?
An adjustable-rate mortgage is a home loan with an interest rate that remains fixed for an initial period, typically 5, 7, or 10 years, before adjusting periodically based on a market index and lender margin.
Modern ARMs commonly use the SOFR index and are designed to offer lower introductory rates than comparable fixed-rate mortgages. This can create meaningful savings during the initial fixed period, but future payments may increase or decrease once adjustments begin.
What does 5/6 mean in a 5/6 SOFR ARM?
The “5” represents the number of years the interest rate remains fixed, while the “6” represents how often the rate can adjust after the fixed period ends.
A 5/6 SOFR ARM maintains the same rate for the first five years and then adjusts every six months for the remainder of the loan term.
What is the difference between a 5/1 ARM and a 5/6 ARM?
Both products provide a fixed interest rate for the first five years.
The difference is how frequently the rate can adjust afterward. A 5/1 ARM adjusts once per year, while a 5/6 ARM adjusts every six months after the initial fixed period ends.
What is SOFR and how does it affect my ARM rate?
SOFR, or the Secured Overnight Financing Rate, is the benchmark index used by most modern adjustable-rate mortgages.
When your ARM adjusts, the lender combines the current SOFR value with your loan’s fixed margin to determine the new interest rate. If SOFR rises, your rate may increase. If SOFR falls, your rate may decrease.
What is the difference between an ARM initial cap, periodic cap, and lifetime cap?
ARM rate caps help limit future interest-rate increases.
The initial cap limits the first adjustment, the periodic cap limits future adjustments, and the lifetime cap establishes the maximum increase allowed over the life of the loan.
Together, these caps help protect borrowers from large or unexpected payment increases.
What is payment shock on an ARM?
Payment shock is the increase in your monthly mortgage payment that can occur after the fixed period ends and the rate adjusts upward.
Because ARM payments can increase as interest rates rise, payment shock is one of the primary risks borrowers should evaluate before selecting an adjustable-rate mortgage.
When does an ARM make more financial sense than a fixed rate?
An ARM often makes the most sense when you expect to sell, refinance, or pay off the loan before the initial fixed period expires.
In these situations, borrowers may benefit from lower introductory rates and monthly payments without experiencing future rate adjustments.
When does a fixed rate beat an ARM?
A fixed-rate mortgage typically makes more sense when you expect to keep the mortgage long term or prefer payment certainty.
Because the interest rate remains unchanged throughout the loan term, fixed-rate borrowers avoid future adjustment risk and always know what their principal and interest payment will be.
What is the ARM margin and how is it set?
The margin is a fixed percentage determined when the mortgage is originated.
At adjustment, the lender adds the margin to the current index value to calculate the new interest rate. The margin never changes during the life of the loan, regardless of market conditions.
Can I refinance an ARM into a fixed-rate mortgage?
Yes. Borrowers can generally refinance an ARM into a fixed-rate mortgage before or after adjustments begin, provided they qualify under current lending guidelines.
Many homeowners choose this strategy to capture initial ARM savings while planning to secure long-term payment stability before the first adjustment period arrives.
What share of borrowers choose ARMs?
Most borrowers continue to choose fixed-rate mortgages, but ARM popularity tends to increase when fixed mortgage rates rise and the savings offered by ARMs become more attractive.
The percentage fluctuates over time based on market conditions, borrower preferences, and the gap between ARM and fixed mortgage rates.
What happens at my ARM's first adjustment?
When the fixed period ends, the lender calculates a new interest rate using the applicable index and your loan’s margin, subject to any adjustment caps.
Your monthly payment is then recalculated based on the remaining loan balance, remaining term, and new interest rate.
Are interest-only ARMs still available?
Some lenders still offer interest-only ARMs, typically through specialized or non-traditional lending programs.
However, these loans are far less common than they were in the past and often include stricter qualification requirements, larger down payments, and additional underwriting standards.
How is my worst-case ARM payment calculated?
The worst-case payment is calculated using the maximum interest rate allowed under the loan’s lifetime cap.
This scenario assumes rates increase to the highest level permitted by the mortgage terms and illustrates the largest monthly payment you could potentially face during the life of the loan.
Where can I get today's ARM and fixed mortgage rates?
Current mortgage rates vary based on market conditions, loan program, credit profile, property type, and other factors.
For personalized ARM and fixed-rate options, connect with a licensed loanDepot loan officer. You can also compare available financing scenarios using the ARM vs. Fixed Calculator and other loanDepot mortgage tools.
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