ARM vs Fixed Rate Mortgage Calculator
Compare total costs of an adjustable-rate vs fixed-rate mortgage over your specific planning horizon.
ARM vs Fixed Rate Mortgages in 2026
Adjustable-rate mortgages (ARMs) offer a lower initial rate — typically 0.5-1.5% below the 30-year fixed — for a set period (5, 7, or 10 years). After that, the rate adjusts annually based on a benchmark index plus a margin. The typical ARM in 2026 is the 7/1 ARM, offering an initial rate around 5.75-6.25% vs 6.8% for a 30-year fixed.
On a $400,000 loan, a 7/1 ARM at 5.75% saves about $305/month compared to a 6.8% fixed for the first 7 years — total savings of $25,620 before adjustment. If you plan to sell or refinance within the fixed period, this is a meaningful advantage.
The Adjustment Risk
After the fixed period, your ARM rate can increase by 2% per year up to a lifetime cap of 5% above the initial rate. A 5.75% ARM with a 5% lifetime cap could reach 10.75%. At 10.75%, your $400K monthly payment would jump from $2,334 to $3,769 — a $1,435/month increase. Always model the worst case before choosing an ARM.