Variable Rate Mortgage

Definition

  • A mortgage product where the interest rate is adjusted periodically based on a standard financial index. Also called an "Adjustable-rate Mortgage." Mortgage brokerages, like CanEquity, generally have access to variable interest rates that are well below prime.

Notes
A type of mortgage loan offered by brokers and lenders.

Synonyms
non-fixed, adjustable rate loan, shifting mortgage rate

Acronyms
VRM

Alternate Spellings
ARM

Related Terms and Acronyms

  • Adjustable-Rate Mortgage (ARM) Acronym,
    • A type of mortgage loan program in which the interest rate and payments may be adjusted as frequently as every month. The principal loan balance or term of the loan may also be adjusted to reflect the rate change. The purpose of the program is to allow mortgage interest rates to fluctuate with market conditions.
    A type of variable rate mortgage product.
  • Adjustment Period Definition,
    • The time between changes in the interest rate in an adjustable-rate mortgage.
  • Alternative Mortgage Definition, Important,
    • A home loan that is not a standard fixed-rate mortgage.
  • Amortization Definition,
    • Amortization refers to the process of gradually paying down the principal of a loan. Each payment toward the principal reduces your loan by that amount. This is different than an interest-only loan payment where the principal balance is never reduced. Amortization for a mortgage loan in Canada is normally 25 years, but can be as few as 5 years.
  • Bridge Mortgage Definition, Important,
    • A short-term loan used to allow a homebuyer to purchase a replacement property while still trying to sell their existing home.
  • Conventional Mortgage Definition, Important,
    • A mortgage that is not insured or guaranteed by CMHC or GE Capital.
  • Convertible ARM Definition,
    • An adjustable rate mortgage (ARM) that can be converted to a fixed-rate mortgage under certain conditions.
  • Convertible Mortgage Definition, Important,
    • A mortgage where the borrower has the option at specified times to change the term length.
  • Fixed Rate Mortgage (FRM) Acronym, Very Important,
    • A loan in which the interest rate and payments remain the same for the entire life of the loan. The interest rate and payment amounts are set at the time of loan origination.
  • Hybrid Mortgage Definition,
    • A mortgage split into different components in order to better manage risks and costs.
  • Initial Interest Rate Definition,
    • The introductory interest rate on an adjustable-rate mortgage (ARM), which usually changes at a predetermined time.
  • Interest Rate (IR) Acronym, Very Important,
    • The rate a lender charges an individual to borrow money.
  • Interest Rate Cap Definition,
    • A limit to the interest rate increases and decreases on an adjustable rate loan; either from one adjustment period to the next or over the life of the loan.
  • Lock-in Definition,
    • A lender's guarantee that the mortgage rate quoted will not change for a specific period. The borrower wants the lock to stay in effect until closing.
  • Mortgage (mtg) Abbreviation, Important,
    • A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
  • Mortgage Rate Definition, Very Important,
    • The interest rate on a mortgage loan.
    You can compare mortgage rates using this website by clicking 'Rates' above.
  • One-year Adjustable Definition,
    • Mortgage whose annual rate changes yearly. The rate is usually based on movements of a published index plus a specified margin, chosen by the lender.
  • Payment Adjustment Period Definition,
    • The time period where payments on an adjustable-rate mortgage (ARM) may fluctuate.
  • Payment Cap Definition,
    • A contractual limit on the size of the monthly payment of an adjustable-rate mortgage or other variable rate loan.
  • Periodic Rate Cap Definition,
    • In an adjustable-rate mortgage (ARM), it limits how much an interest rate can increase or decrease from one adjustment period to the next.
  • Posted Rate Definition,
    • The mortgage rates initially offered by a bank which a borrower is then expected to negotiate down.
  • Prime Rate Definition,
    • The rate suggested by the Bank of Canada on which most banks base their prime mortgage lending rate.
  • Qualifying Rate Definition,
    • The mortgage rate that one must qualify for when applying for a variable rate or a term less than 5 years, so that if rates increase, the borrower can continue to make payments.
  • Rate Definition,
    • Percentage a borrower pays for the use of money, usually expressed as an annual percentage.
  • Rate Index Definition,
    • A table of yields or interest rates being paid on debt (such as Treasury notes or bank deposits) that is used to determine interest-rate changes for adjustable-rate mortgages and other variable-rate loans.
  • Rate Lock-in Definition,
    • A written agreement in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set period of time.
  • Roll Over Mortgage Definition, Important,
    • A type of loan where the interest rate is set for a specific term. At the end of this term, the mortgage is said to "roll-over" and the borrower and lender may agree to extend the loan. If satisfactory terms cannot be agreed upon, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.
  • Variable Interest Mortgage Definition, Important,
    • A loan where the interest rate may vary during the term of the mortgage. The variance is usually tied to some specific factor such as prime bank rate or the guaranteed investment certificate rate for a designated lender.
  • Variable Interest Rate Definition,
    • Percentage that a borrower pays for the use of money, and which moves up or down periodically based on changes in other interest rates.
  • Variable Rate Definition,
    • A floating percentage value that fluctuates based on certain conditions.
  • Variable Rate Mortgage Backed Securities (VRMBS)Acronym, Canada,
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