ARM vs. Fixed Rate Comparison

Compare total cost of an adjustable-rate mortgage versus a fixed-rate loan over the full term.

Loan Amount

Fixed Rate

ARM Initial Rate

ARM Fixed Period

Estimated Adjusted Rate (after fixed period)

Rate Cap Above Initial

Loan Term

Difference (total)

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ARM vs. Fixed: Which Is Right For You?

An ARM offers a lower initial rate — often 0.5–1.5% below the fixed rate. If you plan to sell or refinance before the adjustment period begins, an ARM can save thousands. If you stay long-term, rate adjustments can cost more than the initial savings.

ARM Caps Explained

ARMs have caps that limit rate increases: an initial adjustment cap (typically 2%), a periodic cap per adjustment (2%), and a lifetime cap (typically 5–6% above the start rate). A 5/1 ARM starting at 6.25% with a 5% lifetime cap can go no higher than 11.25%.

When does an ARM make sense?: ARMs are best suited for buyers who plan to sell or refinance within 5–7 years, or those in a declining rate environment who expect to refinance at a lower fixed rate before adjustments kick in.