Adjustable-Rate Mortgages Not as Crazy as They Sound

In this case, if you live in the home for more than 11 years and nine months, you'd save more with a FRM. But this time frame is based entirely on the expected yearly rate hike of 0.25%.

In most cases, ARMs have a periodic adjustment cap in addition to a lifetime cap. The periodic cap limits the yearly rate hike to a set percentage, usually in the ballpark of 2%. If we change that expected rate increase amount in the calculator, you'll see that you can now only own your home for six years and four months before an FRM would have been the smarter move.

There are many factors to consider before choosing one mortgage instrument over another. (For a more detailed discussion of the pros and cons of ARMs, read here.) But if you crunch the numbers properly, you can make the decision that is right for you.