- Posted by HomeHow
- On December 5, 2018
- 0 Comments
A variable rate mortgage (VRM) is a mortgage in which the interest rate may change over time. With an adjustable rate mortgage, the mortgage rate may change from time to time through your mortgage term. In general, the VRM mortgage rate will change when Bank of Canada announces a prime rate change. With a variable rate mortgage, the mortgage payment will stay the same even the mortgage rate changes a few times during the mortgage term.
When the Bank of Canada announces a prime rate increases, borrower will still make the same mortgage payment, but more of the mortgage payment will go towards paying off the mortgage interest. If the prime rate decreases, then more of the mortgage payment will go towards the principal payment.
Variable Rate Mortgage (VRM) is different from Adjustable Rate Mortgage (ARM) as mortgage payments will stay the same as interest rates go up and down. Borrowing can expect paying up the mortgage faster in the interest rate drop environment, or vice versa.
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