Variable Rate Morgage: This is a term that describes a type of loan that has a rate that may
rise or fall in relation to an 'index' and the payments rise or fall accordingly. It is also
popularly known as an 'ARM' (Adjustable Rate Morgage). Although these loans may have payments that
increase or decrease periodically they also typically have a 'fixed' period at the beginning of the
loan. For example, a '5 Year Variable Rate Morgage' would have a very low fixed rate for the first
5 years of the loan. After the 5 year period expires it would then begin adjusting in relation to
an index.
It is important to keep in mind that Variable Rate Morgages can have an element of risk if interest
rates are rising after the expiration of the 'Fixed Rate Period'. Offsetting this is that if rates
are actually dropping then you will not need to refinance in order to reap the benefit of a lower rate
(because Variable Rate Morgages automatically adjust to lower rates). The most common terms for these
types of loans is 3, 5, 7, and 10 year terms.
Variable Rate Morgage - Loan Calculator - Deals on Low Rates...
