Variable Rate Mortgage

A variable-rate mortgage (VRM) is a type of mortgage loan in which the interest rate is not fixed, but instead varies over time based on an index such as the prime rate or LIBOR. This means that your monthly payments may increase or decrease as the interest rate changes.

Variable-rate mortgages are often offered at a lower interest rate than fixed-rate mortgages, but this is because they carry more risk for the lender. As a result, variable-rate mortgages typically come with a higher interest rate cap, which limits how much the interest rate can increase over the life of the loan.

There are a few things to keep in mind if you are considering a variable-rate mortgage. First, you should be aware that your monthly payments could increase significantly if the interest rate rises. Second, you should make sure that you have a good understanding of how variable-rate mortgages work before you sign up for one.

Variable-rate mortgages can be a good option for borrowers who are willing to take on more risk in exchange for a lower interest rate. However, it is important to make sure that you understand the risks involved before you commit to a variable-rate mortgage.

Here are some of the pros and cons of variable-rate mortgages:

**Pros:**

* Lower initial interest rates than fixed-rate mortgages
* Potential for lower monthly payments
* More flexibility if interest rates fall

**Cons:**

* Higher interest rate risk
* Monthly payments can increase significantly if interest rates rise
* Potential for negative equity if the value of your home declines

Ultimately, the decision of whether or not to get a variable-rate mortgage is a personal one. You should weigh the pros and cons carefully to determine which type of mortgage is right for you.