Are you looking for a fixed-rate mortgage or is an adjustable-rate mortgage (ARM) more your style? If you aren’t sure, run the numbers with our free fixed- vs. adjustable-rate mortgage calculator.
It can help clarify the financial difference between the two and may simplify your decision.
Weighing the pros and cons of a fixed rate mortgage vs. adjustable rate mortgage (ARM) can be complicated. To compare these options, factor in the length of the loan, when and how often adjustments occur, which index the lender will use, plus any assumptions about future interest rates. This calculator will make the process simple and walk you thru running the numbers.
These are the total costs of the loans over the years you have specified.
These calculations are tools for learning more about the mortgage process and are for educational/estimation purposes only. Payment shown does not include taxes, insurance, or mortgage insurance (if applicable). This does not constitute an offer or approval of credit. Contact a PrimeLending home loan officer for actual estimates.
For example, a Conventional fixed rate loan with the terms purchase price of $312,500, on a loan term of 360 months, down payment of 20%, and an interest rate of 6.5%, will result in an annual percentage rate of 6.598% with $3,613 in APR fees. Rate pulled 09/02/22, rates change daily. Loans are subject to borrower qualifications, including income, property evaluation, and final credit approval.
A fixed-rate mortgage offers borrowers an interest rate that does not change over the length of their loan. Some benefits of fixed-rate mortgages include predictable monthly payments, protection from market changes and a wide range of product options. Common fixed-rate mortgage terms are 15- and 30-year mortgages.
A 30-year fixed-rate mortgage is considered a long-term mortgage and often offers some of the lowest monthly payments available as the payments are spread out over a longer period of time. Alternatively, a 15-year fixed-rate mortgage is considered a short-term mortgage which offer somewhat higher monthly payments compared to the 30 year mortgage.
An adjustable-rate mortgage (ARM) has an interest rate that changes over the life of the loan. After your introductory period is over, the rate on an ARM will change according to the market which means if market rates lower, so does the rate on your mortgage.
Often you will see ARM’s shown as X/Y with X being how many years of your fixed initial rate and Y representing how often your rate will change (in either years or months) throughout the remainder of your loan. Every lender is different, however some offer a range of ARM terms including 5/6, 7/6, 10/6 and 15/6.
Fixed-rate mortgages and ARMs work differently so it is important to know which one will work best for your plans. That’s where a fixed- vs. adjustable-rate mortgage (ARM) calculator can help you compare the potential cost of each option. The key difference between a fixed- and adjustable-rate mortgage is that a fixed-rate mortgage has a set interest rate through the life of the loan while an ARM’s interest rate can change (possibly more than once) throughout the life of the loan.
Here’s a side-by-side comparison of fixed- vs. adjustable-rate mortgages:
When you’re trying to choose between a fixed-rate mortgage or an ARM, your desired interest rate now, and in the future, may factor into your choice. What if we told you that you could refinance either option down the road? That’s right. You can refinance your fixed-rate mortgage or your adjustable-rate mortgage (ARM) in the future.
How does it work? Imagine the day comes that you are still in love with your home, but not your mortgage rate. You can refinance your fixed-rate mortgage to another fixed loan or you can choose to refinance to an ARM and vice-versa; you can refinance your adjustable-rate mortgage to another ARM or to a fixed rate.
The process of refinancing either a fixed-rate mortgage or an ARM is very similar to the process of getting your initial mortgage, only this time you might have some home equity that you can tap into. A refinance can help you turn your home equity into cash that you can use any way you choose. Need a new roof? A refinance could help. Want to go on a vacation? A refinance could help get you there.
Before you refinance, it’s important to talk to your PrimeLending loan officer about your options and if you are better off refinancing to a fixed-rate mortgage or to an ARM.