Fixed vs. Adjustable Rate Calculator
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Comparison Results
$0.00
- Total Interest (Full Term): $0.00
- Total Cost (Full Term): $0.00
$0.00
Initial payment for first 5 years
- Max Monthly Payment (Simulated): $0.00
- Total Interest (Full Term): $0.00
- Total Cost (Full Term): $0.00
Calculate to see comparison.
Understanding Fixed vs. Adjustable Rate Mortgages
Choosing between a Fixed-Rate Mortgage (FRM) and an Adjustable-Rate Mortgage (ARM) is one of the most critical financial decisions a borrower makes. This calculator helps simulate the long-term financial impact of both options by accounting for rate resets, caps, and market fluctuations.
The Fixed-Rate Advantage
A Fixed-Rate Mortgage locks in your interest rate for the entire life of the loan (commonly 15 or 30 years). The primary benefit is stability. Regardless of how high market inflation rises or how the economy performs, your principal and interest payment remains exactly the same. This predictability is ideal for borrowers who plan to stay in their home for a long time or those who prioritize financial security over potential short-term savings.
The Adjustable-Rate (ARM) Risk & Reward
An Adjustable-Rate Mortgage typically starts with a lower interest rate than a fixed loan for a set initial period (e.g., 5, 7, or 10 years). This is known as the "teaser" or introductory rate. Once this period ends, the rate adjusts annually based on market indices (like SOFR or CMT) plus a margin.
While the initial payments are lower, the risk lies in the adjustment phase. If market rates increase, your monthly payment can rise significantly. ARMs usually have caps—limits on how much the rate can increase per year and over the loan's lifetime—but the "maxed out" payment can often be double the initial interest cost.
How to Interpret the Results
When using this calculator, focus on the Total Cost and the Break-Even Analysis:
- Short-Term vs. Long-Term: If you plan to sell the property before the fixed period of the ARM ends (e.g., within 5 years), the ARM is almost always cheaper because you utilize the low rate without facing the risk of adjustment.
- Worst-Case Scenario: Look at the "Max Monthly Payment" in the ARM results. Can your budget handle that amount if rates skyrocket? If not, the safety of a Fixed rate is likely worth the extra initial cost.
- Total Interest Paid: Over a full 30-year term, an ARM can become significantly more expensive than a fixed loan if rates rise steadily, even if it started cheaper.
function calculateComparison() {
// 1. Get Inputs
var principal = parseFloat(document.getElementById('loanPrincipal').value);
var years = parseFloat(document.getElementById('termYears').value);
var fixedRate = parseFloat(document.getElementById('fixedRate').value);
var armInitialRate = parseFloat(document.getElementById('armInitialRate').value);
var armFixedYears = parseFloat(document.getElementById('fixedPeriod').value);
var armMaxRate = parseFloat(document.getElementById('maxRate').value);
var estIncrease = parseFloat(document.getElementById('estIncrease').value);
// Validation
if (isNaN(principal) || principal <= 0 || isNaN(years) || years <= 0) {
alert("Please enter valid positive numbers for Principal and Term.");
return;
}
var totalMonths = years * 12;
// — FIXED RATE CALCULATION —
var frMonthlyRate = (fixedRate / 100) / 12;
var frPayment = 0;
var frTotalCost = 0;
var frTotalInterest = 0;
if (fixedRate === 0) {
frPayment = principal / totalMonths;
frTotalCost = principal;
frTotalInterest = 0;
} else {
frPayment = principal * (frMonthlyRate * Math.pow(1 + frMonthlyRate, totalMonths)) / (Math.pow(1 + frMonthlyRate, totalMonths) – 1);
frTotalCost = frPayment * totalMonths;
frTotalInterest = frTotalCost – principal;
}
// — ARM CALCULATION (Simulation) —
var armTotalCost = 0;
var armCurrentPrincipal = principal;
var armCurrentRateAnnual = armInitialRate;
var armMaxPayment = 0;
var armFirstPayment = 0;
// Loop through every month of the loan
for (var m = 1; m (armFixedYears * 12)) {
// We are in the adjustable period
// Check if it's an adjustment month (usually annually after fixed period)
// Simplified: We assume rate adjusts exactly once a year after fixed period
var monthsPastFixed = m – (armFixedYears * 12);
// If it is the first month of a new year in the adjustable phase
if ((monthsPastFixed – 1) % 12 === 0) {
// Increase rate
armCurrentRateAnnual += estIncrease;
// Cap the rate
if (armCurrentRateAnnual > armMaxRate) {
armCurrentRateAnnual = armMaxRate;
}
}
}
// Calculate Payment for this specific month based on remaining principal and remaining term
var monthsRemaining = totalMonths – m + 1;
var armMonthlyRate = (armCurrentRateAnnual / 100) / 12;
var currentMonthlyPayment = 0;
if (armMonthlyRate === 0) {
currentMonthlyPayment = armCurrentPrincipal / monthsRemaining;
} else {
currentMonthlyPayment = armCurrentPrincipal * (armMonthlyRate * Math.pow(1 + armMonthlyRate, monthsRemaining)) / (Math.pow(1 + armMonthlyRate, monthsRemaining) – 1);
}
// Store first payment for display
if (m === 1) {
armFirstPayment = currentMonthlyPayment;
}
// Track max payment
if (currentMonthlyPayment > armMaxPayment) {
armMaxPayment = currentMonthlyPayment;
}
// Pay interest
var interestPayment = armCurrentPrincipal * armMonthlyRate;
var principalPayment = currentMonthlyPayment – interestPayment;
// Update totals
armTotalCost += currentMonthlyPayment;
armCurrentPrincipal -= principalPayment;
// Handle precision drift
if (armCurrentPrincipal < 0) armCurrentPrincipal = 0;
}
var armTotalInterest = armTotalCost – principal;
// — DISPLAY RESULTS —
// Format Currency Function
function fmt(num) {
return "$" + num.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
}
// Fixed Results
document.getElementById('fixedMonthlyDisplay').innerHTML = fmt(frPayment);
document.getElementById('fixedTotalInterest').innerHTML = fmt(frTotalInterest);
document.getElementById('fixedTotalCost').innerHTML = fmt(frTotalCost);
// ARM Results
document.getElementById('armInitialMonthlyDisplay').innerHTML = fmt(armFirstPayment);
document.getElementById('resFixedPeriod').innerHTML = armFixedYears;
document.getElementById('armMaxMonthly').innerHTML = fmt(armMaxPayment);
document.getElementById('armTotalInterest').innerHTML = fmt(armTotalInterest);
document.getElementById('armTotalCost').innerHTML = fmt(armTotalCost);
// Analysis Text
var diff = Math.abs(frTotalCost – armTotalCost);
var analysisHTML = "";
if (armTotalCost < frTotalCost) {
analysisHTML = "Based on your inputs (including the estimated annual increase), the
Adjustable Rate Mortgage saves you
" + fmt(diff) + " over the life of the loan compared to the Fixed option.";
} else {
analysisHTML = "Based on the estimated rate increases, the
Fixed Rate Mortgage is the safer option, saving you
" + fmt(diff) + " over the full term compared to the ARM scenario.";
}
// Add break even context
var initialSavings = (frPayment – armFirstPayment) * 12 * armFixedYears;
if (initialSavings > 0) {
analysisHTML += "However, the ARM saves you roughly
" + fmt(initialSavings) + " during the initial " + armFixedYears + "-year fixed period.";
}
document.getElementById('analysisText').innerHTML = analysisHTML;
}