Adjustable or fixed rate?

An adjustable-rate mortgage (ARM) starts lower, then can change. See what could happen to your payment if rates fall, stay the same or rise, and how the total interest compares with a fixed rate.

These numbers are estimates only and may not be accurate. They depend on your real interest rate, credit, income and the home's actual taxes and insurance. Contact us for accurate figures; it's free and there's no obligation. The starting interest rate (6.5%) is an example only, not a quote: your rate depends on your credit, loan type, down payment and the market, and can be higher or lower. Change it to see the difference.

The loan

Loan amount ($)

30-year fixed rate (%) example

ARM starting rate (%) example

Fixed for the first

Years you expect to keep it

Caps and scenarios

First change cap (%)

Later changes cap (%)

Lifetime cap (%)

If rates fall, by (%)

If rates rise, by (%)

Over the years you keep the loan

Scenario	First payment	Highest payment	Total interest	Balance left

Principal and interest only. After the fixed years, the ARM is assumed to move toward today's fixed-rate level plus the scenario change, within the caps. Real ARMs follow an index plus a margin set in the loan.

How ARMs work Fixed-rate mortgages

Common questions

What do the caps on an ARM mean?

They limit how much the rate can change. With 2/1/5 caps, the rate can move up to 2% at the first change, 1% at each yearly change after that, and never more than 5% above the starting rate.

When can an ARM make sense?

When you expect to sell or refinance before the fixed period ends, or you want a lower payment now and can handle a higher one later. If you plan to stay a long time and rates rise, a fixed rate is safer.

Can the rate go down?

Yes, if rates fall, an ARM's rate can drop at each change, usually down to a floor set in the loan.

For education and planning only. Approximate estimates; not legal, tax or financial advice. Not a loan offer, approval or commitment to lend. Example rates are for illustration only; rates can change and may not be available at commitment or closing. Rates, terms, taxes, insurance and program rules vary and change; your actual numbers may differ. Mortgage services by Bill McElhill, NMLS #2176490, licensed in Florida, Georgia and Texas.

Adjustable or fixed rate?

The loan

Caps and scenarios

Over the years you keep the loan

Common questions

Your next step

Not sure which is right for you?