Adjustable-rate mortgage
A mortgage where the interest rate starts fixed for a period, then adjusts on a schedule tied to a market index. A 5/1 ARM is fixed for 5 years, then adjusts every year after.
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See how it worksWhere this comes up: on the market
Part 1 of 4
Why a seller cares
A buyer on an ARM qualifies on today's lower rate, which can make a financed offer a little stronger on paper. It changes nothing about your sale except how the buyer's lender sizes the loan.
Part 2 of 4
A simple example
A buyer offers $300,000 with a 7/1 ARM at 5.9%. Their payment is fixed for seven years, and the lender approves them on that payment.
| The buyer's loan | What it means at your closing |
|---|---|
| A 7/1 ARM at 5.9% | The same wire as any loan; the rate is the buyer's business |
| A 30-year fixed at 6.6% | Same again; a slightly higher payment they had to qualify for |
| The ARM adjusts in year eight | You sold in year one; it never touches you |
The kind of loan shapes the buyer's payment, not your proceeds.
Part 3 of 4
What people get wrong
That an ARM makes an offer riskier for the seller. Once the loan funds, the rate schedule is between the buyer and their lender.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
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