What is a variable and adjustable rate mortgage?
With a variable rate mortgage, a mortgage in which payments are fixed for the term, although interest rates may fluctuate from month to month depending on market conditions. If interest rates go down, more of the payment goes towards reducing the principal; if rates go up, a larger portion of the monthly payment goes towards covering the interest. With an adjustable rate mortgage, a mortgage in which your payment may change from month to month. If interest rates go down, your payment will go down, if rates go up, then your payment will go up as well. Both the variable rate and adjustabel rate mortgage are based on your banks Prime rate which has the potential of changing up to 8 times per year.
