Adjustable Rate Loan


Adjustable Rate Loan

Adjustable Rate Loan

An adjustable rate loan is considered to be a home or mortgage loan that will usually have an introductory interest rate that will last for a certain period of time and then the home or mortgage loan will adjust every year after for the remaining time period which will usually come out to a 30 year loan. After the set time period, the interest rate will change and so will your monthly loan or mortgage payment. The adjustable rate loan monthly payment amount will usually have a cap that is set when the loan or mortgage is initially taken out. An adjustable rate loan or mortgage can also be known as a “variable rate mortgage” or a “floating rate mortgage”.


An adjustable rate loan can have some advantages and disadvantages that you may want to consider before obtaining an adjustable rate loan or mortgage. One advantage of an adjustable rate loan could be the fact that the initial interest rate is usually lower than a fixed rate type loan, which means that your monthly payment will be lower at the start of your loan. An adjustable rate loan might be better for borrowers who plan on staying in their home for a short period of time. If you think your income will grow in the future, you may feel comfortable with the idea of having a lower payment at first then you can be comfortable with the higher mortgage payment when your income is higher and the adjustable rate loan adjusts to the new rate. The disadvantage of having an adjustable rate loan is this type of loan is usually considered to be riskier for the borrower because the interest rate will probably go up after the initial period ends.