Variable Rate Loans

A Variable Rate Loan has two parts: 1) an initial period of time that the rate is fixed, 2) after the initial fixed rate period the rate on the loan changes each year based on a predetermined factor.

At Mortgage Planning Group, we offer a variety of Variable Rates Loans, including interest only loans and fully amortizing loans. Our Variable Rate Loan programs offer fixed rate periods from 1 month to 10 years.

Who is a Variable Rate Loan for?

Often Variable Rate Loans offer a lower initial rate than comparable Fixed Rate Loans reducing the total finance charges during the initial years. A fact to consider - the average home owner purchases a new home or refinances their existing mortgage every 5 years. Therefore, with proper planning, a borrower wanting a fixed rate may be able to match the term of loan with the expected life of the loan reducing the overall borrowing costs.

Conditions that may accompany the use of this loan :

• Comfort with an initial low payment and monthly payments that will change periodically thereafter
• Looking to purchase a home with the lowest initial rate and payment possible
• Expect to sell a home or refinance the home loan within 3, 5, or 7 years.
  
  

Common Misconceptions of Variable Rate Loans

While a Variable Rate Loan may be an appealing option to many, there are a number of common misconceptions that you should be aware of prior to making any final decisions.

One common misconception is that the rate changes will always be an increase to the current rate. This is not necessarily true; in an economy in which rates are falling the new rate may be lower than the current rate. Borrowers may choose a variable rate loan to take advantage of falling rates without incurring the costs of refinancing their mortgage each time.