10/1 ARM vs 30 Year Fixed Calculator

How a 10/1 ARM splits 30 years into two phases

A 10/1 ARM is one 30-year loan with two phases. For the first 10 years the rate is locked, which makes the first 120 payments as predictable as a fixed loan. From month 121 the rate adjusts once a year for the remaining 20 years, and each adjustment recasts the payment over whatever term is left. The Consumer Financial Protection Bureau describes the structure in its ARM guidance: hybrid ARMs advertised as 3/1, 5/1, 7/1 or 10/1 carry a fixed rate for the first number of years and adjust annually after that.

The first number is why buyers pick the 10/1 over shorter hybrids: a decade of certainty covers most careers, most school timelines and about a third of the loan's life. The second number is why it is priced below the 30-year fixed: the lender takes rate risk for only 10 of the 30 years, and prices the remaining 20 at whatever the market index does.

That trade has a precise break-even. The calculator runs both loans side by side, month by month, and reports where the cumulative cost lines cross, which is the honest answer to whether the discount is worth the uncertainty.

Index plus margin sets the fully indexed rate

After the fixed period the ARM rate is the loan's index plus its margin. The CFPB's explanation of index and margin states it plainly: the index is a market rate that moves with conditions, the margin is set by the lender in the loan agreement and does not change after closing, and the fully indexed rate equals the two added together.

The worked example on this page uses an index of 4.50% and a margin of 2.75%, so the fully indexed rate is 7.25%. The start rate of 6.25% sits a full point below that, which is common: lenders set the initial rate below the fully indexed level, and the first adjustment pulls the loan toward index plus margin whether that is up or down. A borrower whose start rate sits above the fully indexed rate would see a cut at the first reset instead.

Which index the loan uses is chosen at application and does not change later. Common indexes include the prime rate, Treasury constant maturity rates and SOFR-based measures. Your note names the index and the margin, so the fully indexed rate can be computed before signing.

Caps decide how fast the rate can climb

Three caps control each adjustment, per the CFPB's rate caps explainer. The initial adjustment cap limits the first move after the fixed period, the subsequent cap limits every move after that, and the lifetime cap limits the total change over the loan. The CFPB notes that initial caps are commonly 2 or 5 points, subsequent caps 1 or 2 points, and lifetime caps most commonly 5 points.

This page uses a 2/2/5 structure, one of the two common patterns. Starting at 6.25%, the rate at the first reset can reach 8.25%, but the fully indexed rate of 7.25% is inside that band, so 7.25% applies. If the index then rose a full point a year, the rate would walk 8.25%, 9.25%, 10.25%, 11.25% and stop there for the life of the loan, because 6.25% plus the 5-point lifetime cap is 11.25%.

The payment column prices each capped rate against the balance still owed at that point, which is why year 15 costs less than the stress test of recasting the full year-11 balance at 11.25%. The calculator reports that worst case separately as $3,535.48.

The payment recast at year 11

Every adjustment re-amortizes the remaining balance over the remaining term. On a $400,000 loan at 6.25%, ten years of $2,462.87 payments leave a balance of $336,950.85. Recast over 240 months at the fully indexed 7.25%, the new payment is $2,663.18, a rise of $200.31 or 8.1%.

Recast is why ARM payments do not jump as much as the rate does. The balance by year 11 is 16% smaller than the original, and the term left is 20 years rather than 30, so the payment math absorbs part of the rate move. The same 1-point move at month 121 would cost far more on a fresh loan than it costs here.

Recast also cuts both ways. When rates fall, the payment drops faster than the rate does, because the smaller balance is spread over the shortened term at the lower rate. In the falling-index scenario in the table below, the payment in year 13 drops to $2,473.86, below the original start payment, even though the rate only returned to 6.25%.

The 30-year fixed comparison at the 2026 PMMS rate

The 30-year fixed loan keeps one rate for all 360 payments. Freddie Mac's Primary Mortgage Market Survey, the standard benchmark for the 30-year fixed, printed 7.24% for the week of October 29, 2026, and that is the figure used in the comparison below. It is a weekly average of lender offers, not a quote, so run your own number through the calculator when you have one.

At 7.24% the fixed loan on $400,000 costs $2,725.99 a month. Over 360 payments that is $981,357, of which $581,357 is interest. The ARM at a 6.25% start rate costs $2,462.87 in the fixed period, so the monthly saving is $263.12 and the 10-year saving is $31,574.85, before any reset risk is priced.

The balance row runs the other way than most borrowers expect. The ARM accrues interest at 6.25% instead of 7.24%, so more of each smaller payment reaches principal: $63,049 retired against $54,837, leaving the ARM borrower owing $8,212 less after a decade. That head start is part of why the year-11 recast stays contained, and why the ARM still wins on total interest when rates stay flat.

Total interest across four index paths

The reset rate depends on the index, and nobody knows its path. The table runs four assumptions through the full 30-year schedule, with the index moving a fixed amount each year from its 4.50% starting point and the 2/2/5 caps applied at every adjustment. Payments recast annually on the remaining balance.

Two lines in that table carry the decision. First, a 1-point annual rise pushes total interest $119,838 above the fixed loan, and from the second reset on the ARM payment sits above the fixed payment, reaching $729.50 above it by year 15. Second, the crossover month: cumulative ARM costs pass the fixed loan at month 129 on the 0.5-point path and month 124 on the 1-point path. Sell or refinance before roughly year 11 and the ARM wins on every path shown.

When the 10/1 wins and when the fixed wins

The ARM wins when the holding period ends inside the fixed window. Ten years of $263.12 monthly savings is $31,574.85, and a borrower who sells in year 8 keeps about $25,000 of that discount for certain. Even the first year after the reset saves $62.81 a month while the index stays put. The CFPB's consumer handbook on adjustable-rate mortgages recommends asking how long you plan to hold the loan before choosing between the two, and the arithmetic here is the reason.

The fixed wins when rates rise and the borrower stays. On the 1-point path the ARM pays more than the fixed loan from the second reset onward, and no later rate cut can fully undo the earlier years. The lifetime cap of $3,535.48 is 43.6% above the fixed-period payment, which is the number to budget against before signing, because the CFPB advises borrowers to plan for the highest payment the loan can reach.

Loan size matters too. FHFA's 2026 baseline conforming limit is $832,750 for one-unit properties, announced November 25, 2025, so a $400,000 loan is a conforming loan and the comparison prices above apply. Above that limit, jumbo pricing sets both rates and the ARM discount can differ, so rerun the calculator with quoted rates rather than survey averages.

Reading the calculator fields

Seven inputs define the ARM side: loan amount, start rate, fixed years, index, margin, and the three caps, plus an index path selector that moves the index by a fixed amount each year after the fixed period ends. One more input sets the 30-year fixed rate. Every field is editable, and the caps and margin are on your Loan Estimate, so use the real values rather than the defaults.

The output panel returns the ARM payment during the fixed period, the balance at the end of it, the payment at the first reset, the highest payment on the chosen path, the payment if the lifetime cap applied at the first reset, total interest for both loans, and the difference. The 30-year fixed rows use the same loan amount and a 360-month schedule.

The tool prices principal and interest only. Property tax, insurance, and mortgage insurance are the same under both loans at the same balance, so they do not change the comparison, but they do change the payment you write each month. Closing costs are also left out: ARM loans sometimes carry them differently, and a refinance later would add a new set.