Why choose a Variable-rate mortgage?
The low initial interest rates offered by VRMs make them attractive during periods when interest rates are high, or when homeowners only plan to stay in their home for a relatively short period. Similarly, homebuyers may find it easier to qualify for a VRM than a traditional loan. However, VRMs are not for everyone. If you plan to stay in your home long-term or are hesitant about having loan payments that shift from year-to-year, then you may prefer the stability of a fixed-rate mortagage. Components of Variable-rate mortgages Variable-rate mortgages have three primary components: an index, margin, and calculated interest rate. • Index The interest rate for a VRM is based on an index that measures the lender’s ability to borrow money. While the specific index used may vary depending on the lender, some common indexes include U.S. Treasury Bills and the Federal Housing Finance Board’s Contract Mortgage Rate. One thing all indexes have in common, however, is that they cannot be controlle
