Every number already in the boxes is an example, not a quote or an offer of credit. The example rates are Bankrate's national average purchase rates for Nov 2, 2026, plus 0.25 percentage point. The example index is the 30-day average SOFR published by the New York Fed for Nov 2, 2026. Your rate depends on your credit, down payment, loan type, and the day you lock.
The example rates, their APRs, and the terms behind them
| Example loan | Rate | APR |
|---|---|---|
| 30-year fixed | 7.53% | 7.633% |
| 360 payments of $2,244 | ||
| 5/6 conventional SOFR ARM | 6.80% | 6.794% |
| 60 payments of $2,086, then 300 payments of about $2,053 at 6.625% if the index holds. The rate can never go above 11.80%. | ||
| 7/6 conventional SOFR ARM | 6.67% | 6.746% |
| 84 payments of $2,059, then 276 payments of about $2,051 at 6.625% if the index holds. The rate can never go above 11.67%. | ||
| 10/6 conventional SOFR ARM | 6.82% | 6.854% |
| 120 payments of $2,090, then 240 payments of about $2,059 at 6.625% if the index holds. The rate can never go above 11.82%. | ||
Every example assumes a $400,000 purchase price, a 20% down payment ($80,000), a $320,000 loan, a 30-year term (360 monthly payments), and 1.00 point ($3,200) paid at closing as the only prepaid finance charge, on a primary single-family home. With 20% down there is no mortgage insurance in these examples. Payments are principal and interest only. Taxes and insurance are not included, so the actual payment will be higher. The ARM APRs assume the index (30-day average SOFR, 3.91% on Nov 2, 2026) plus a 2.75% example margin stays the same after the fixed period. On an ARM the rate and payment can go up after closing, and the APR may increase after consummation. Rates are as of Nov 2, 2026, change daily, and are not a rate On Target Mortgage is offering you. Not a commitment to lend. All loans are subject to credit approval and underwriting.
1. The home and the fixed-rate offer
From your pre-approval or Loan Estimate.
2. The ARM offer
The adjustable interest rate (AIR) table on page 2 of your Loan Estimate lists all of these.
3. After the fixed period
At each change date the new rate is the index plus the margin, limited by the caps.
5/6 conventional SOFR ARM: the start rate is fixed for 5 years (60 payments), then the rate can change every 6 months. It can never go above 11.8%.
How the two loans compare
Example loan of $320,000 over 30 years. Monthly principal and interest for each loan:
| Year | Fixed payment | ARM if index holds | ARM worst case | Ahead if index holds | Ahead worst case |
|---|---|---|---|---|---|
| 1 | $2,244 | $2,086 | $2,086 | $2,340 | $2,340 |
| 5 | $2,244 | $2,086 | $2,086 | $11,772 | $11,772 |
| 6 | $2,244 | $2,053 | $2,687 | $14,665 | $6,623 |
| 7 (yours) | $2,244 | $2,053 | $3,108 | $17,559 | -$4,513 |
| 10 | $2,244 | $2,053 | $3,108 | $26,205 | -$42,710 |
| 15 | $2,244 | $2,053 | $3,108 | $40,204 | -$106,712 |
| 30 | $2,244 | $2,053 | $3,108 | $66,794 | -$242,057 |
"Ahead" adds up the monthly payments you saved with the ARM, plus how much less (or more) you owe than on the fixed loan, minus the extra points you paid for the ARM. Payments shown are for the last month of each year.
How the math works
- Payment. Principal and interest only, over 30 years for both loans. Taxes, insurance, HOA dues, and mortgage insurance are left out because they are the same either way. For the full monthly payment, use the Mortgage Payment Calculator.
- The fixed years. The ARM payment stays at the start rate until the first change date.
- Each change date. The new rate is the index plus the margin, rounded to the nearest one-eighth of a percent. It can't move more than the cap for that change, can't go above the start rate plus the lifetime cap, and can't fall below the margin. The payment is then recalculated on what you still owe over the years left.
- If today's index holds. The index stays at the number in the box for the life of the loan.
- Worst case. The rate rises by the full cap at every change date until it hits the lifetime cap, then stays there. This is the payment the CFPB says to be sure you can afford before you take an ARM.
- Ahead. Payments saved with the ARM, plus the difference in what you owe, minus the difference in points.
Common ARM caps
Caps are written as three numbers: first change / each later change / lifetime. Your loan's AIR table shows the real ones.
| ARM | Rate changes and caps |
|---|---|
| 5/6 conventional SOFR ARM | Fixed 5 years, then changes every 6 months. Caps 2/1/5, so the rate can never go more than 5 points above the start rate. |
| 7/6 and 10/6 conventional SOFR ARM | Fixed 7 or 10 years, then every 6 months. Caps 5/1/5, so the full 5 points can arrive at the first change. |
| 5/1 FHA ARM | Fixed 5 years, then once a year. Caps 1/1/5 (HUD also allows 2/2/6). |
| 5/1 VA ARM | Fixed 5 years, then once a year. Caps 1/1/5 are common. |
Conventional caps are Fannie Mae's and Freddie Mac's standard SOFR ARM plans. FHA caps are from HUD. A lender can offer different terms, so compare the AIR table on each Loan Estimate.
Before you pick an ARM, ask your lender for these
- The AIR table for each ARM offer: index, margin, first change date, how often it changes, and the minimum and maximum rate.
- The fully indexed rate today (index plus margin). If it is above the start rate, your rate goes up at the first change even if the index never moves.
- The highest payment the loan allows, in writing, and the month it could first arrive.
- The rate they qualify you at. On a 5-year conventional ARM it is the higher of the start rate plus the first cap, or the fully indexed rate.
- Points on each offer, side by side with the fixed loan quoted the same day.
Looking at a 2-1 buydown too? A buydown also lowers the early payment, but the rate after year 2 is set at closing. The Rate Buydown Calculator runs those numbers.
ARM reset worksheet (save or print)
Fill one in for each ARM offer. Bring it to your lender call.
The offers
- Loan amount: $________ Fixed rate: ______% Points: ______ Date quoted: ________
- ARM type: ______ Start rate: ______% Points: ______
From the AIR table
- Index: ____________ Margin: ______% Fully indexed rate today: ______%
- First change: month ______ Then every ______ months Caps: ____ / ____ / ____
- Minimum rate: ______% Maximum rate: ______%
Monthly principal and interest
- Fixed: $________ ARM start: $________ Saved each month: $________
- ARM if the index holds: $________ ARM highest possible: $________ (from month ______)
My call
- Years I expect to keep the loan: ______ Ahead at that point if the index holds: $________ Worst case: $________
- Could I pay the highest payment from my budget today? Yes / No My plan if I can't refinance: ______________________________
Educational estimate only. This page is not a Loan Estimate, a rate quote, a lock, or an offer of credit, and it is not tax or legal advice. Rates, points, indexes, and margins change and depend on credit, down payment, property, loan type, and lender. Example figures are labeled and come from public sources: the 7.53% fixed, 6.80% 5/6 ARM, 6.67% 7/6 ARM, and 6.82% 10/6 ARM rates are Bankrate's national average purchase rates for Nov 2, 2026 (7.28%, 6.55%, 6.42%, and 6.57%, as of 6:30 AM ET) plus 0.25 percentage point; the 1.00 point is an example; the 3.91% index is the New York Fed 30-day average SOFR for Nov 2, 2026, rounded; the 4.36% FHA and VA example index is the 1-year Treasury constant maturity yield for Oct 30, 2026; the 2.75% conventional margin and 2.00% FHA and VA margin are examples, not a lender's published terms. APRs are figured on the example loan with the assumptions in the example terms box. Caps come from Fannie Mae's Standard ARM Plan Matrix, Freddie Mac's SOFR ARM requirements, and HUD's FHA adjustable-rate mortgage page. Qualifying rules come from the Fannie Mae Selling Guide, B3-6-04. Refinancing later is never guaranteed: it is a new loan you have to qualify for, with new closing costs. Your Loan Estimate, your note, and your Closing Disclosure control the actual terms. Not a commitment to lend. All loans are subject to credit approval and underwriting. On Target Mortgage, LLC, NMLS #2629561 (www.nmlsconsumeraccess.org). Equal Housing Opportunity.
On Target Mortgage, LLC · NMLS #2629561 · Equal Housing Opportunity · Orlando, FL