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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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ARM or fixed-rate calculator
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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.
Common adjustable-rate mortgages
ARM type
Months fixed
10/1 ARM
Fixed for 120 months, adjusts annually for the remaining term of the loan.
7/1 ARM
Fixed for 84 months, adjusts annually for the remaining term of the loan.
5/1 ARM
Fixed for 60 months, adjusts annually for the remaining term of the loan.
3/1 ARM
Fixed for 36 months, adjusts annually for the remaining term of the loan.
1 year ARM
Fixed for 12 months, adjusts annually for the remaining term of the loan.
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%. Mortgage amount: Expected balance for your mortgage. Term in years: The number of years over which you will repay this mortgage. The most common mortgage terms are 15 years and 30 years. Please note that for the interest-only ARM you will have a balloon payment for the entire principal balance at the end of the loan term. Expected rate change: The annual adjustment you expect in your ARM. 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 interest rate than a fixed-rate mortgage. The rate of an interest only ARM will vary by lender. 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 expected rate change. Interest rate cap: This is the maximum interest rate for this mortgage. The mortgage’s interest rate will never exceed the interest rate cap. Monthly payment: Monthly principal and interest payment, or PI, for the fixed-rate mortgage and the fully-amortizing ARM. This is an interest-only payment for an interest-only ARM.
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.
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