A variable rate mortgage is a mortgage that has an interest rate that can change during the term of the loan. If market rates fluctuate, you will be charged the difference in interest applied to your mortgage principal. Don't ever under-estimate the difference between Fixed Rate and Variable Rate mortgage loans. Definition, Synonyms, Translations of variable-rate mortgage by The Free Dictionary Learn about the definition for this legal term. As rates change over time, simply comparing the fixed and variable rates at the point you take your mortgage is a relatively blunt tool. Standard variable rate - the default variable rate the lender offers to mortgage borrowers with a standard residential mortgage. A mortgage product where the interest rate is adjusted periodically based on a standard financial index. I drew down my EBS mortgage in August 2007 when the ECB base rate was 4.00%. If the prime rate goes up or down, then the variable rate effectively goes up or down. This impacts the amount of principal you pay off each month. But remember it’s fixed for a certain time like three, five or seven years and if you change it before the end, we may charge you a fee. Vice versa, if you believe the interest rate on mortgage loans will decrease through your amortization timeframe, go with Variable Rate mortgage. Interest rates are currently at all time lows. Variable mortgage rates are typically stated as prime plus/minus a percentage discount/premium. Adjustable Rate Mortgage A mortgage with an interest rate that changes periodically. Mortgage brokerages, like CanEquity, generally have access to variable interest rates that are well below prime. Folks often consider closed variable-rate mortgages to be restrictive because they can’t be paid off early without a penalty. 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. This means that the interest rate you are charged will rise when the Base Rate increases and fall if it decreases, affecting your mortgage payments in the same way. Variable Rate Mortgage. For example, variable rates in reference to mortgage loans rely heavily on the Bank of Canada's prime lending rate. On the other hand, most (not all) closed variables allow you to terminate with a fairly reasonable 3-month interest penalty. It's a tradeoff between locking in a payment versus starting at a lower cost. Tracker rate - a variable rate that is equal to a published interest rate (typically LIBOR, plus a fixed interest rate margin. 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 … For example, a variable rate could be quoted as prime - 0.8%. When a mortgage has a variable interest rate, it is more commonly referred to as an adjustable-rate mortgage (ARM). My loan offer like yours states that after 3 years I will revert to a variable base rate but to a rate that is “currently 5.25%.” Both accounts have the same rate definition(“variable base rate). Definition of variable rate. 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. When a mortgage has a variable interest rate, it is more commonly referred to as an adjustable-rate mortgage (ARM). Variable rate mortgage definition is - adjustable rate mortgage. variable-rate mortgage definition: noun Abbr. Variable-Rate Mortgage (VRM) is a type of mortgage loan program wherein interest rates and payments are adjusted as frequently as every month. Variable mortgage rates expose you to changes in interest rates and, thus, in your mortgage payments. 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 … Previous Next > More Mortgage Definitions. Learn more. However, the monthly payments on a variable rate mortgage start out lower. 8 Mortgage … Many ARMs start with a low fixed interest rate … For some, that’s a legitimate concern. Also called an "Adjustable-rate Mortgage." Example of variable rate. While your regular payment will remain constant, your interest rate may change based on market conditions. Verification of deposit (VOD) Verification of employment (VOE) Veterans Administration (VA) mortgage; Yield Spread Premium; Yield to maturity; Zero Down Mortgage; Zestimate ; Zoning ordinances; Waiver; Walk-through; 1,000 NMLS Practice Test Questions. variable rate mortgage meaning: a loan for buying a house on which the interest rate can change over time: . A fixed rate mortgage has a rate of interest which doesn’t change for a set period of time, so you know exactly how much you pay every month. 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.) Some variable-rate mortgages offer the option of a fixed payment. Related Terms and Acronyms: alternative mortgage A home … There is an exception to this. Variable rate. A variable rate mortgage is a mortgage rate that can change over time, which means it can decrease or increase depending on wider economic circumstances. How does a standard variable rate work? Variable rate - the rate varies at the discretion of the lender. However, you could pay a lot more interest than you would with a variable rate mortgage. VRM See adjustable-rate mortgage. 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. This is in comparison to fixed rate mortgages, where the monthly payments will always stay the same. Déterminez si un prêt hypothécaire à taux variable convient à votre situation financière et découvrez des … So, even if interest rates rise (or fall), your payment stays the same. 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. The interest rate of a variable rate mortgage can fluctuate, which affects your monthly mortgage repayment. Variable rate mortgages are riskier than fixed rate mortgages because the payments are less predictable. 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. Common fixed-interest-rate periods on an ARM are three or five years, expressed as a 3/1 or 5/1 ARM, respectively. A variable rate mortgage is a home loan with an interest rate that changes over time, causing the monthly loan payments to go up or down. Tracker mortgage rates track the Bank of England Base Rate (a variable rate of interest) over a specified period of time. variable rate 1. 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. A variable rate is always attached to the lender’s prime rate. Generally speaking, an adjustable rate mortgage is linked to some major benchmark rate; for example, the interest rate may be stated as "LIBOR + 1%." Kevin obtains a mortgage loan at a time when interest rates are falling. This guide will examine two types of mortgages - fixed rate and variable rate. It occurs when prime rate goes up so much that your fixed payment no longer covers the interest you owe each month. A floating or non-fixed percentage value or interest rate that fluctuates based on certain economic conditions or rate index. Payment is adjusted periodically. There are limits to how much a variable rate mortgage can change. Due to the added risk of rates increasing, providers will often offer lower variable rates than fixed rates. 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. There are quite a few different types of mortgage and each has their own good and bad points.. An interest rate that changes periodically in relation to an index. A fixed rate makes it easier to budget for payments. Fixed rate mortgages keep your mortgage repayments predictable and stable. A fixed rate mortgage is pretty straightforward. Definition of variable rate mortgage (VRM) variable rate mortgage (VRM) 1. Variable & fixed rate mortgages explained. This is where a broker can really help you see the wood for the trees. You can see how this definition is different to how they define their SVR now. 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 mortgage definition: a mortgage involving a loan with a variable interest rate over the period of the loan | Meaning, pronunciation, translations and examples 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. Define Variable Rate Mortgage Loan. That point is called the 'trigger rate.' These types of rates can go up or down at any time, therefore are considered variable. When rates on variable interest rate mortgages decrease, more of your regular payment is applied to your principal. 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. 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. A variable rate mortgage will fluctuate with the CIBC Prime rate throughout the mortgage term. Some lenders will also let you take out a mortgage on their SVR, but this is usually the most expensive option. The monthly payments usually change every month, also. For example, change in treasury bill rate. In VRM, interest rate changes in response to changes in the main economic index. To further muddy the waters in September 2006 the EBS defined their “Standard Variable Rate” as “A mortgage rate which can rise and fall in line with the interest rate changes set by the European Central Bank (ECB)”.