How to read it
What this fixed-rate vs. ARM comparison is showing
The fixed-rate side keeps the user-entered example interest rate unchanged for the full loan term. The ARM side keeps the initial example rate for the period you choose, then recalculates principal and interest using the post-initial example rate you enter.
The ARM calculation is intentionally simplified. It does not attempt to predict future index values, lender margins, adjustment timing or future rate changes. Use it to stress-test a payment scenario, not to forecast an actual ARM.
ARM mechanics
Index, margin and rate caps matter after the initial period
For an adjustable-rate mortgage, later interest rates are generally determined using an index plus a lender-set margin, subject to the loan's rate caps and other contract terms. The initial adjustment cap, later adjustment caps and lifetime cap can limit how much the rate changes.
Before comparing a real ARM, review the Loan Estimate and the loan's ARM disclosures to understand when the first adjustment can occur, how often later adjustments can occur, which index applies, the margin and the caps.
Payment scope
The payment shown here is not your full monthly housing cost
The calculator shows estimated principal and interest. It does not include property taxes, homeowners insurance, mortgage insurance, HOA dues or other amounts that may be part of or paid alongside a real housing payment.
It also does not calculate APR, closing costs, lender fees, points or qualification. Those items can materially change the economics of a real loan comparison.
Amortization
View the annual principal-and-interest illustration
The table uses the same assumptions as the calculator. For the ARM example, the post-initial rate you enter is held constant after the initial period solely for illustration.
Show annual amortization −
| Year | Payments | Principal | Interest | Remaining balance |
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