If market rates fluctuate, you will be charged the difference in interest applied to your mortgage principal. There are quite a few different types of mortgage and each has their own good and bad points.. A mortgage product where the interest rate is adjusted periodically based on a standard financial index. A variable rate is always attached to the lender’s prime rate. It occurs when prime rate goes up so much that your fixed payment no longer covers the interest you owe each month. Variable mortgage rates are driven by the same economic factors, except variable rates fluctuate with movements in the prime lending rate, the rate at which banks lend to their most credit-worthy customers. Recent Examples on the Web Since the government rolls over much of its debt, selling short-term debt like 2-year bonds is like having a variable rate mortgage. A variable-rate mortgage, also known as a standard variable rate mortgage, adjustable-rate mortgage (ARM) or tracker mortgage, is a home loan whose interest rate is periodically adjusted, depending on the cost to the lender of borrowing money on the credit markets. Variable rate - the rate varies at the discretion of the lender. Payment is adjusted periodically. means any individual Mortgage Loan purchased pursuant to this Agreement the interest rate of which adjusts periodically based on the index identified in the Mortgage … A standard variable rate (SVR) is a type of mortgage interest rate that you are most likely to go onto after finishing an introductory fixed, tracker or discounted deal. Many ARMs start with a low fixed interest rate for the first few years of the loan, only adjusting after that time period has expired. Don't ever under-estimate the difference between Fixed Rate and Variable Rate mortgage loans. Definition of variable rate mortgage (VRM) variable rate mortgage (VRM) 1. variable-rate mortgage (VRM) A precursor to the modern adjustable-rate home mortgage (ARM), and still used in the area of commercial mortgages.With a variable-rate mortgage,the interest rate on the loan changes whenever the index rate changes. Variable rate mortgages are riskier than fixed rate mortgages because the payments are less predictable. variable-rate mortgage definition: noun Abbr. Variable Rate Mortgage. variable rate mortgage meaning: a loan for buying a house on which the interest rate can change over time: . A general rule of thumb - go with Fixed Rate mortgage if you believe the interest rate on mortgage loans will increase through your amortization timeframe. There are fixed rate mortgages and variable rate mortgages (which you’ll often hear referred to by their aliases — adjustable rate mortgages or just VRMs.) That point is called the 'trigger rate.' Variable rate mortgage definition: a mortgage involving a loan with a variable interest rate over the period of the loan | Meaning, pronunciation, translations and examples Define Variable Rate Mortgage Loan. Many ARMs start with a low fixed interest rate … A floating or non-fixed percentage value or interest rate that fluctuates based on certain economic conditions or rate index. The interest rate of a variable rate mortgage can fluctuate, which affects your monthly mortgage repayment. This guide will examine two types of mortgages - fixed rate and variable rate. When a mortgage has a variable interest rate, it is more commonly referred to as an adjustable-rate mortgage (ARM). Tracker mortgage rates track the Bank of England Base Rate (a variable rate of interest) over a specified period of time. These types of rates can go up or down at any time, therefore are considered variable. The monthly payments usually change every month, also. A fixed rate mortgage is pretty straightforward. This impacts the amount of principal you pay off each month. variable rate 1. For example, change in treasury bill rate. Kevin obtains a mortgage loan at a time when interest rates are falling. There is an exception to this. Variable rate. In VRM, interest rate changes in response to changes in the main economic index. You can see how this definition is different to how they define their SVR now. Due to the added risk of rates increasing, providers will often offer lower variable rates than fixed rates. Variable-Rate Mortgage (VRM) is a type of mortgage loan program wherein interest rates and payments are adjusted as frequently as every month. A variable rate mortgage will fluctuate with the CIBC Prime rate throughout the mortgage term. To work out which is truly a better deal, look at how much interest rates would need to change before one deal beats the other. Some lenders will also let you take out a mortgage on their SVR, but this is usually the most expensive option. Standard variable rate - the default variable rate the lender offers to mortgage borrowers with a standard residential mortgage. VRM See adjustable-rate mortgage. Definition of variable rate. There are limits to how much a variable rate mortgage can change. I drew down my EBS mortgage in August 2007 when the ECB base rate was 4.00%. Variable mortgage rates are typically stated as prime plus/minus a percentage discount/premium. So, even if interest rates rise (or fall), your payment stays the same. Also called an "Adjustable-rate Mortgage." When a mortgage has a variable interest rate, it is more commonly referred to as an adjustable-rate mortgage (ARM). Example of variable rate. Obtenez plus de renseignements sur les prêts hypothécaires à taux variable et sur la manière dont les variations des points de base se répercutent sur ces prêts. Vice versa, if you believe the interest rate on mortgage loans will decrease through your amortization timeframe, go with Variable Rate mortgage. This is in comparison to fixed rate mortgages, where the monthly payments will always stay the same. An interest rate that changes periodically in relation to an index. When rates on variable interest rate mortgages decrease, more of your regular payment is applied to your principal. For some, that’s a legitimate concern. However, you could pay a lot more interest than you would with a variable rate mortgage. Understanding the key features of a fixed rate mortgage and a variable mortgage can be fairly straightforward, but deciding between the two and picking one that saves you money is much trickier. For example, variable rates in reference to mortgage loans rely heavily on the Bank of Canada's prime lending rate. Variable rate mortgage definition is - adjustable rate mortgage. A bank quotes you an annual percentage rate and term — say 4% for 5 years on a $300,000 loan, amortized over the course of 25 years — and you agree to pay a specific amount … Interest rates are currently at all time lows. Definition, Synonyms, Translations of variable-rate mortgage by The Free Dictionary Generally speaking, an adjustable rate mortgage is linked to some major benchmark rate; for example, the interest rate may be stated as "LIBOR + 1%." Common fixed-interest-rate periods on an ARM are three or five years, expressed as a 3/1 or 5/1 ARM, respectively. Related Terms and Acronyms: alternative mortgage A home … If the prime rate goes up or down, then the variable rate effectively goes up or down. It can be hard to decide upon which mortgage is right for you when you want to take out a loan to buy a property. Learn more. For example, a variable rate could be quoted as prime - 0.8%. 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