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How much will my home loan payment be for a variable or fixed rate loan?

Variable vs Fixed Rate Loan



This calculator will help you to compare a fixed interest rate mortgage with both a standard variable rate and interest-only variable rate (often called line of credit) mortgages.

A variable rate mortgage may provide for lower monthly payments to start with, but chances are those payments will go up in the current financial climate.

Here you can compare an variable rate mortgage with a fixed rate to calculate the real interest expense of both options.

It is worth noting that in order to qualify for a home mortgage loan, lenders will use the actual adjusted rate as oppose to the start rate. This is unless if the fixed rate period of the loan is at least 3 years in which case the initial fixed rate is used to qualify.

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Fixed rate mortgage and variable rate mortgage definitions.

In order to make an informed decision you need to familiarize yourself with the terminology.

  • Fixed rate home mortgage loans are self-explanatory. The rate is fixed for a specified period up to 30 years. Other variations are 20 and 15-year amortization periods.


  • A variable rate mortgage starts at an initial rate, sometimes referred to as the teaser rate, and stays fixed for a predetermined period say 1 or 3 years. After that period the lender will add the index with the margin and compare it with your start rate. If your start rate is lower than that number then your rate will be increased by the difference not exceeding your mortgage loan’s cap.
Terminology:

  • Start Rate is the rate at which the initial payments are calculated.
  • The start rate may be fixed for 2, 3, 5, 7 or 10 years.
  • Index is a number derived from financial markets, which is a reflection of prevailing interest rates.
  • Margin is a polite way of saying the lenders profit margin.
  • Adjustment Period is the period after which the mortgage loan will adjust. This for initial fixed rate period loans can be two different periods, initial and reoccurring.
  • Adjustment Cap is the cap that is placed on any periodic adjustments.
  • Life Cap is the maximum rate above which a rate may not rise, normaly set at 6% over the start rate in the USA but doesn't usually apply in Australia.
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Variable vs Fixed Rate Mortgage Calculator
This calculator will help you to compare a fixed rate mortgage with both fully-amortizing (std variable) and interest-only variable rate mortgages.

Loan Information
Mortgage loan amount:
Mortgage loan term:
Expected adjustment (%):
Fixed Rate Mortgage
Fixed interest rate (%):
Fully Amortized Variable Rate Mortgage
Beginning interest rate (%):
Number of months before first rate adjustment:
Interest rate cap (%):
Interest-Only Variable Rate Mortgage
Beginning interest rate (%):
Number of months before first rate adjustment:
Interest rate cap (%):
Comparison Results Fixed Variable Interest-Only Variable
Beginning monthly principal and interest payment:
Total monthly payments:
Total interest:
Maximum monthly payment:


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