Variable Rate Mortgage + 1.2

A Variable Rate Mortgage, also known as an adjustable-rate mortgage (ARM), is a type of home loan where the interest rate can change periodically.

Some borrowers prefer variable rate mortgages as they often start with lower interest rates compared to fixed-rate mortgages. It can be beneficial when interest rates are expected to decrease or if the borrower plans to sell the property before the rate adjusts.

The interest rate in a Variable Rate Mortgage can change based on various factors such as changes in the lender's prime rate or an index like the London Interbank Offered Rate (LIBOR). The rate adjustment typically occurs at predetermined intervals, often annually or quarterly.

The initial interest rate, also known as the teaser rate, is the starting rate offered by the lender. It is typically lower than what a borrower would get with a fixed-rate mortgage.

Variable Rate Mortgages usually have built-in protections such as periodic and lifetime interest rate caps. These caps limit how much the interest rate can increase during a specific time frame or over the life of the loan.

The main risk is that if interest rates increase significantly, borrowers could experience higher monthly payments. The uncertainty of future payments makes it challenging to plan and budget in advance.

It may be possible to refinance a Variable Rate Mortgage into a fixed-rate mortgage if the borrower wishes to secure a more stable interest rate. However, the availability of refinancing options may depend on various factors such as credit score, loan-to-value ratio, and current market conditions.

As the interest rate can change over time, the monthly payments in a Variable Rate Mortgage may fluctuate. When the rate increases, the payments generally rise, and vice versa.

Some lenders may offer options for borrowers to convert their Variable Rate Mortgages to fixed-rate ones during the loan term. However, there might be specific conditions and fees associated with such conversions.

It is generally a good idea to consult with a financial advisor who can evaluate your specific financial situation and provide guidance on whether a Variable Rate Mortgage is suitable for you based on your goals, risk tolerance, and market expectations.