Fixed vs. Adjustable Rate Mortgage Calculator  
The Fixed vs. Adjustable calculator will help you determine whether you should choose an fixed rate loan or an adjustable rate loan. The interest rate for a fixed rate loan stays the same for the life of the loan. But, with an adjustable rate mortgage (ARM), the interest rate fluctuates periodically and is based on an index like the U.S. Treasury Security Yields (1 Year T Bill), the Cost of Funds Index (COFI) and the London InterBank Offer Rate (LIBOR). ARMs are attractive to home buyers because they generally offer a lower initial interest rate than a fixed rate mortgage, saving you more money up front. They also can save you more in the long term, provided interest rates remain stable or decrease. And often, home buyers choose an ARM because they can qualify for a larger loan amount. But for all these benefits there is a tradeoff – the risk of rates going up. When comparing fixed versus adjustable, it is important to look at the index against which your interest rate will be measured, as well as the historical and predicted growth or decrease of that index. Margins are also an important factor, especially when comparing loans between lenders 



General Loan Information  
Loan Amount 
Enter the amount of money you need to borrow. 

Loan Term 
The loan period is the length of time in years you will need to borrow the money before your loan is fully paid back. Typical fixed loan terms are 15 or 30 years. 

Fixed Rate Loan Information  
Fixed Rate 
Enter the interest rate for the fixed loan. 

Adjustable Rate Loan Information  
Initial Rate 
Enter the interest rate for the adjustable loan's initial period. This rate is sometimes called the teaser rate. 

Initial Period 
This is the period in which you receive the teaser rate, or the first contracted interest rate, which is usually lower than the current fixed rate. During this period, typically 1,3, 5, or 7 years, your interest rate will not fluctuate. 

Adjustable Period 
This is the time between changes in the interest rate, once the initial period has passed.. On some adjustable rate loans, the adjustable period can change monthly. 

Period Cap 
This is a limit set on how much the adjustable rate can increase or decrease in the adjustable period. If your adjustable period is 1 year and your adjustable cap is 2%, that means your interest rate cannot increase or decrease more than 2% each year. 

Lifetime Cap 
Like the adjustable cap, this is a limit set on interest rates, but this cap is the maximum increase you will receive over the lifetime of the loan. If you have your loan for 15 years and your lifetime cap is 6%, your interest rates cannot increase more than a total of 6% over the loan's starting rate during this 15 year period. 

Current Index Rate 
The index is a published interest rate used as a base interest rate on an adjustable rate loan. Typical indexes are the U.S. Treasury bill index, LIBOR (London InterBank Offered Rate), or the COFI (Cost of Funds Index). Enter the value of your current index rate. 

Margin 
Margins are the percentage points added to the index by the lender to determine the final adjustable rate. The margin doesn't usually change over the life of the loan, but will often change from lender to lender. 

Yearly Index Change 
The number of percentage points you estimate the selected index will rise or fall. Select a value that makes sense to you or ask your lender to suggest a value. 


