A variable rate mortgage(VRM) or
adjustable rate mortgage
(ARM) is a
mortgage loan where the
interest rate varies to reflect
market conditions.
Interest on a variable-rate
mortgage will rise and fall with
increases and decreases in overall
interest rates. If interest rates
rise, you can expect to see an
increase in what you pay monthly as
well.
A variable-rate mortgage often
comes with an interest rate cap,
which limits the amount by which the
interest rate can change. Though
they do have the potential to raise
your monthly payments, a
variable-rate mortgage can also
lower your monthly payments
significantly.
Most home buyers looking for a
low rate and low monthly payments
will do well with a variable-rate
mortgage; however, if you are
planning on staying in your home for
more than 7 years, you may want to
look into securing a fixed-rate
mortgage to protect yourself against
rising interest rates.
Whether you're
buying your first home or
refinancing your existing mortgage,
a variable-rate mortgage is a
popular option.
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