Use this ARM or fixed-rate calculator to determine whether a fixed-rate mortgage or an adjustable rate mortgage, or ARM, will be better for you when buying a home. The calculator also compares a fully amortizing or interest-only ARMs.
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Fixed rate mortgage: A fixed rate mortgage has the same interest rate and monthly payment throughout the term of the mortgage. The payment is calculated to pay off the mortgage balance at the end of the term. The most common terms are 15 years and 30 years.
Fully-amortizing ARM: This is the most common type of adjustable-rate mortgage. The monthly payment is calculated to pay off the entire mortgage balance at the end of the term. The term is typically 30 years. After any fixed interest rate period has passed, the interest rate and payment adjusts annually. A fully-amortizing ARM will also have a maximum rate that it will not exceed. This calculator uses a maximum interest rate of 12%. Below is a list of the most common types of fully-amortizing ARMs.
Interest-only ARM: An interest-only ARM only requires monthly interest payments. Because you are not paying any principal, as you are with the other two types of mortgages described above, this can lower your monthly payment. However, because your mortgage’s principal balance is not decreased, you will have a balloon payment at the end of the mortgage’s term. Like a fully-amortizing ARM, an interest only ARM will often have a period where the interest rate is fixed, and then it is adjusted annually. An interest only ARM will also have a maximum interest rate that it will not exceed. This calculator uses a maximum interest rate of 12%.
Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regard to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.