Calculation Logic
This tool compares two loan structures side by side: a fixed-rate loan with a constant payment, and an ARM with an initial low-rate period followed by a higher adjusted rate. It calculates the monthly payment for each phase, then multiplies by the number of months to produce a total cost over your chosen comparison period. The payment-over-time chart shows exactly where the ARM payment jumps.
How to Use
- Enter your loan amount.
- Input the fixed rate and the ARM's initial and adjusted rates.
- Select the ARM's fixed period (5/1, 7/1, or 10/1) and the total term for both loans.
- Choose how many years you want to compare (5, 10, or 15).
- Click Compare to see total cost, winner, and payment chart.
Pro Tips
- Short-timers win with ARMs: If you plan to sell or refinance within 5–7 years, an ARM often costs less.
- Watch the adjusted rate: The "worst case" ARM rate is what matters most. Make sure you can afford it if you stay longer.
- Rate caps matter: Real ARMs have annual and lifetime caps. This calculator uses your entered adjusted rate as a simplified model.