Variable Mortgage Definition

Closed Mortgage. Closed term mortgages are usually the better choice if you’re not planning to pay off your mortgage in the short term. Interest rates for closed term mortgages are generally lower than for open term mortgages. Closed term mortgages offer you the ability to save on interest costs and payoff your mortgage faster.

A variable-rate mortgage, adjustable-rate mortgage (ARM), or tracker mortgage is a mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets.

So why would any borrowers opt for an open-variable mortgage or a line-of-credit loan? One explanation is that they assume that an early payout penalty on all closed mortgages will be prohibitively high, as it often is with fixed-rate mortgages that invoke the dreaded interest-rate differential penalty calculation.

Not everyone, unfortunately, succeeds at learning these lessons, at balancing these risks and costs – and that is the subject of two thoughtful articles on Seeking Alpha today. or who take out a.

Lowest Arm Rates COPPELL, Texas, Sept. 20, 2017 /PRNewswire/ — Caliber Home Loans, Inc. ("Caliber"), the nation’s fourth largest non-bank residential mortgage originator, recently introduced a new 5/5 adjustable-rate.Mortgage Cap What Is A 5 5 Arm Fixed-rate periods. The most popular adjustable-rate mortgage is the 5/1 ARM: The 5/1 ARM’s introductory rate lasts for five years. (That’s the “5” in 5/1.) The 5/1 ARM’s introductory rate lasts for five years. (That’s the “5” in 5/1.) After that, the interest rate can change every year. (That’s the “1” in 5/1.)Cap versus Floor. A cap limits the interest a borrower or bond issuer pays in a rising rate environment and sets a maximum level of return for the lender or investor. A floor sets a base level of interest that a borrower must pay and also sets a base level of interest that a lender or investor can expect to earn.

An adjustable rate mortgage is a loan that bases its interest rate on an index. The index is typically the Libor rate , the fed funds rate , or the one-year Treasury bill . An ARM is also known as an adjustable rate loan, variable rate mortgage, or variable rate loan.

Arm Loan A 5/1 hybrid adjustable-rate mortgage (5/1 hybrid ARM) begins with an initial five-year fixed-interest rate, followed by a rate that adjusts on an annual basis. The "5" in the term refers to the.

 · Open vs. Closed Variables. Assumptions: The above analysis assumes that prime rate does not go up, the amortization is 25 years, the borrower makes regular monthly payments, and a simple 3-month interest penalty applies. Some lenders calculate their variable-rate penalties differently, so speak with a mortgage planner for guidance specific to your circumstances.

Adjustable rate mortgage (ARM). An adjustable rate mortgage is a long-term loan you use to finance a real estate purchase, typically a home. Unlike a fixed-rate mortgage, where the interest rate remains the same for the term of the loan, the interest rate on an ARM is adjusted, or changed, during its term.

Variable Mortgage. A mortgage set to the lenders standard rate, it is influenced by economic conditions so will fluctuate with over the course of the mortgage. Generally, the payments remain the same, despite interest rate changes. Also known as a variable-rate mortgage.