Variable Rate Mortgage
A variable rate mortgage is a type of home loan in which the interest rate is not fixed. Instead, interest payments will be adjusted at a level above a specific benchmark or reference rate, such as the Prime Rate + 2 points. Lenders can offer borrowers variable rate interest over the life of a mortgage loan. They can also offer a hybrid adjustable-rate mortgage (ARM), which includes both an initial fixed period followed by a variable rate that resets periodically thereafter.Common varieties of hybrid ARM include the 5/1 ARM, having a 5-year fixed term followed by a variable rate on the remainder of the loan (typically 25 more years).