ARM vs Fixed-Rate Mortgage Calculator
Compare a 30-year fixed against a 5/1 and 7/1 ARM over the years you'll actually keep the loan. The calculator stress-tests each ARM to its worst-case rate caps and shows the exact break-even year — the point where the ARM stops saving you money.
Loan & Rate Details
Until you sell or refinance.
Fixed for 5 years, then adjusts annually.
Fixed for 7 years, then adjusts annually.
Rate Caps (worst-case adjustment limits)
The most your rate can rise. A common ARM is “2/2/5”. We model the worst case allowed by these caps — the maximum payment your loan documents disclose.
Over your 7-year hold, the 7/1 ARM would
save $18,293
in interest versus the 30-year fixed — even assuming the rate jumps to its worst-case cap after the fixed period. Its worst-case break-even is year 10, after you plan to be gone.
30-Year Fixed vs 5/1 ARM vs 7/1 ARM
30-Year Fixed
5/1 ARM
7/1 ARM
“Worst-case future payment” is the payment right after the first reset if the rate jumps by the full initial cap. Later resets can push it higher still, up to the lifetime cap.
Break-Even by Year
Cumulative interest paid through each year — worst-case caps. The ARM stays cheaper until its bar passes the fixed bar; that crossover is the break-even year.
The ARM risk in one line.
Your intro payment is real and guaranteed for the fixed period. Everything after the first reset is a forecast. If rates are higher when your ARM adjusts — or you can't sell or refinance on schedule — your payment can climb to the worst-case numbers above and stay there. An ARM rewards a confident timeline and punishes a stuck one.
How an ARM is supposed to save you money
An adjustable-rate mortgage trades certainty for a lower starting rate. A 5/1 or 7/1 ARM locks a below-market rate for the first five or seven years, then adjusts once a year for the rest of the 30-year term. During that fixed window your payment is lower than a comparable 30-year fixed, and every dollar of that gap is real, banked savings.
The math only works in your favor if you're gone — sold or refinanced — before the adjustments arrive, or if rates happen to be low when they do. That's why the single most important input above isn't the rate; it's how long you'll keep the loan. Match the fixed period to your real timeline and the ARM is a discount. Outlive it and the ARM becomes a bet.
Reading the break-even year
The break-even chart tracks cumulative interest, not the monthly payment. For the first several years the ARM's bar sits below the fixed loan's because the intro rate is cheaper. After the fixed period ends and the rate climbs toward its caps, the ARM accrues interest faster and its bar starts catching up. The year its bar passes the fixed bar is the break-even year: the moment the early savings are fully erased.
The decision rule is simple. If your planned hold period ends before the break-even year, the ARM comes out ahead even in the worst case. If you'd still be in the loan past break-even, you're relying on rates cooperating or on refinancing on schedule — and a 30-year fixed removes that risk entirely. Use the amortization schedule to see how the fixed loan pays down month by month, and the refinance calculator to pressure-test your exit plan.
The risk: what happens when an ARM adjusts
After the fixed period, your rate resets to an index plus a fixed margin, bounded by three caps usually written as something like “2/2/5”:
- Initial cap — the most the rate can rise at the very first adjustment (e.g. 2 percentage points).
- Periodic cap — the most it can rise at each adjustment after that, typically once a year.
- Lifetime cap — the ceiling, the maximum increase over your intro rate for the life of the loan (e.g. 5 points, so a 6% start can reach 11%).
The calculator above assumes the worst case allowed by these caps — the rate jumps the full initial cap, then keeps rising until it hits the lifetime ceiling. That isn't a prediction; it's the legally disclosed maximum, and it's the right number to plan around. The honest question isn't “will rates rise?” but “could I afford the payment if they rose to the cap and I couldn't refinance?”
Two things make that risk worse than it looks: refinancing isn't guaranteed (it depends on your credit, home value, and rates at that future moment), and an ARM reset often arrives precisely when rates are high — the same conditions that make refinancing expensive. If a worst-case payment would strain your budget, the certainty of a fixed-rate loan is usually worth the higher starting rate.
Who an ARM actually fits
ARMs suit borrowers with a short, confident timeline: people who know they'll relocate for work within a few years, buyers in a starter home they plan to outgrow, or those expecting a large income or liquidity event that will let them pay the loan off. For these buyers the fixed period covers the entire time they hold the loan, so the adjustments never happen to them.
A fixed-rate mortgage fits everyone else — anyone staying put long-term, anyone who needs a predictable payment, and anyone who couldn't comfortably absorb a reset. If you're still deciding what you can take on, start with the affordability calculator and the main mortgage payment calculator to ground every comparison in a payment you can actually live with.
Frequently Asked Questions
Is an ARM mortgage a good idea in 2026?
An ARM can be a good idea in 2026 if you have a firm timeline — you expect to sell or refinance before the fixed period ends, usually 5 or 7 years. The intro rate on a 5/1 or 7/1 ARM is typically lower than the 30-year fixed, so you save real money during those fixed years. The risk is that if you're still in the loan when it adjusts, your rate can rise to its caps and your payment can jump sharply. Run your own numbers in the calculator above: if the break-even year falls after you plan to be gone, the ARM wins; if it falls during your hold period, the fixed loan is the safer bet. An ARM is not a bet on rates falling — it's a tool that pays off when your timeline is short and certain.
What does 5/1 ARM and 7/1 ARM mean?
The first number is how many years the rate stays fixed; the second is how often it adjusts after that. A 5/1 ARM is fixed for 5 years, then adjusts once a year for the remaining 25. A 7/1 ARM is fixed for 7 years, then adjusts annually. Both are 30-year loans — the only difference from a fixed mortgage is what happens after the intro period. A 7/1 ARM gives you two more years of certainty than a 5/1, usually in exchange for a slightly higher intro rate.
How high can an ARM payment go?
ARMs come with rate caps that limit each move, written as three numbers like 2/2/5. The first is the most the rate can rise at the first adjustment, the second is the most at each later adjustment, and the third is the lifetime cap — the maximum increase over your starting rate, ever. On a 2/2/5 ARM starting at 6%, the rate could hit 8% at the first reset, 10% the next year, and is capped at 11% for the life of the loan. The calculator above models this exact worst case so you can see the highest payment your loan documents actually allow.
When is a fixed-rate mortgage better than an ARM?
A fixed-rate mortgage is better when you plan to stay in the home long-term, value a payment that never changes, or can't absorb a payment increase if rates rise. Because the fixed payment is locked for the full 30 years, you carry no reset risk at all. The trade-off is that you pay a higher rate from day one. If your break-even year lands before you'd realistically move or refinance, the certainty of a fixed loan is usually worth that premium.
Can I refinance out of an ARM before it adjusts?
Yes, and many borrowers plan to. Refinancing into a fixed loan before your ARM's first adjustment locks your rate and removes the reset risk. The catch is that refinancing depends on conditions you don't control — your credit, your home's value, and prevailing rates at that moment. If rates are higher or your equity has dropped when the fixed period ends, refinancing may cost more than you hoped or not pencil out at all. That's exactly why the worst-case projection matters: treat the ARM as if you might not be able to refinance, and make sure you could still handle the payment.