Fixed-Rate vs. SOFR ARM
Compare a fixed-rate mortgage with an index-based ARM (historically tied to LIBOR, now SOFR). The ARM rate equals an index plus a margin.
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How the fixed-rate vs. SOFR ARM calculator works
This tool compares a fixed-rate mortgage with an index-based ARM under both rising and falling rate paths, so you can judge the fixed loan's certainty against the ARM's variability. Older ARMs were tied to LIBOR, but that benchmark was retired, and most US ARMs in 2026 reference SOFR instead.
The fixed side keeps one payment for the term. The ARM side starts lower, then resets to index plus margin within its caps. Running an upward and a downward path shows where the ARM saves money and where the fixed loan's stability proves more valuable.
Worked example: with loan amount of $320,000, loan term (years) of 30 and fixed rate of 7.18%, the fixed rate mortgage vs SOFR ARM shows fully-indexed ARM rate of 7.25%.
- ARM initial payment
- $1,816.92
- Fixed payment
- $2,167.79
- ARM at fully-indexed rate
- $2,182.96
- ARM lifetime interest
- $430,595
| Index rate (e.g. SOFR) | ARM | Fixed |
|---|---|---|
| 3.00% | $347,424 | $460,405 |
| 4.50% | $430,595 | $460,405 |
| 6.00% | $518,768 | $460,405 |
| 8.00% | $642,990 | $460,405 |
The better choice flips around 6.00% — ARM wins on one side, Fixed on the other.
The formula
The fixed loan amortizes at a single rate for the full term. The ARM amortizes at its start rate through the fixed period, then resets to index + margin, capped, at each adjustment. Comparing the payment and cumulative interest across rate paths reveals the crossover where fixed becomes cheaper.
How every calculator here computes, what it assumes and how the defaults stay current: our methodology.
- LIBOR no longer sets US mortgage rates; legacy LIBOR loans transitioned to SOFR-based replacement indexes by 2023.
- Both loans share principal and term so the comparison isolates the effect of fixed versus indexed pricing.
- Rising and falling paths are illustrative; the real index follows market forces that cannot be predicted.
- The ARM margin is fixed for the loan's life and added to whatever index value applies at each reset.
- Refinancing options, closing costs, and mortgage insurance are excluded though they affect the real decision.
Results are estimates for educational purposes and are not financial advice. Confirm exact figures with your lender or a licensed advisor.
Questions about the fixed-rate vs. SOFR ARM calculator
My ARM still says LIBOR. What index does it use now?
LIBOR stopped publishing its main US dollar settings in mid-2023, and existing loans were moved to a replacement index, most commonly a SOFR-based rate, often with a small spread adjustment to keep the transition roughly neutral.
Your servicer should have notified you of the new index and any adjustment. Your margin stays the same; only the underlying benchmark changed.
Is a SOFR-based ARM riskier than the old LIBOR ARMs were?
The structure is the same: index plus margin, bounded by caps. SOFR is considered more robust than LIBOR because it is based on actual overnight Treasury repo transactions rather than estimates, which makes it harder to manipulate.
Day to day, SOFR can be slightly more volatile, but caps still limit how much your rate and payment can move at each reset.
In a falling-rate path, why might I still prefer the fixed loan?
Even when the ARM wins on a falling path, the fixed loan keeps an advantage: you can refinance to capture lower rates if they drop, while staying protected if they climb instead. The ARM forces you to accept whatever the index does.
Paying slightly more for the fixed loan buys optionality, which has real value when future rates are genuinely unknown.
Is my information saved or shared?
No. Every calculation runs entirely in your browser. We never store, transmit or sell the numbers you enter.
Fixed-rate loan vs a LIBOR/SOFR ARM — what is the difference?
A fixed-rate loan locks one rate for the term; an index-based ARM (older loans used LIBOR, new ones use SOFR) starts lower then moves with that benchmark plus a margin. The fixed loan removes rate risk; the ARM bets on rates staying low.
Sources
- CFPB — Fixed-rate vs adjustable-rate mortgages
- Freddie Mac — Primary Mortgage Market Survey (weekly average rates)
- CFPB — Loan Estimate explainer
How the figures on this site are calculated and tested: methodology · editorial policy.
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