Variable vs Adjustable-Rate Mortgages

interest rates in a column on a document
Troy Reichert

Troy Reichert

Troy Reichert is the owner of Reichert Mortgage LLC. With over 20 years of serving the United States Airforce, Troy wants to continue to give back to the community by helping give people their best chance at securing a home.

As you begin your process of homeownership, you will be faced with many unfamiliar mortgage terms like adjustable, fixed, and variable-rate. Though these are difficult terms to navigate, it is important to take the time to decipher and understand how these terms affect potential mortgage options. 

As a mortgage broker in Colorado Springs, The Reichert Mortgage Team is equipped to help you through the maze of confusing loan language. There are various types of mortgage types that you can select from. By knowing what each term means, you can make educated decisions about your financial future. 

What is a Variable Rate Mortgage?

This type of home loan is less common in the United States but is still available as an option from some mortgage loan brokers. Though the terms adjustable and variable interchangeably, there are key differences between them. 

A variable-rate loan has fluctuating interest rates, but these changes do not affect monthly payments. However, they do affect the amortization schedule. The changes in the interest rates have a direct correlation to your monthly payments; the higher the rate, the higher the payment, and vice versa. The interesting feature of this type of loan is that when the amounts are lower, you pay more towards the principal and when they are higher, you pay more towards the interest. The frequency at which the rate changes for a variable rate is much higher than its adjustable counter-part. Variable-rates can change multiple times throughout a year.

What is an Adjustable-Rate Mortgage?

Many of the features from a variable-rate are comparable to an adjustable-rate mortgage. There are differences that affect each. These types of loans also utilize fluctuating interest rates, however, monthly payments are affected. When the rate goes up, the payments raise as well and when the rate goes down, the payments follow. Due to this, the amortization schedule is not altered.  

Interest rates change depending on the scheudle you have. Your specific schedule will be provided by your mortgage broker. Different schedules are presented as one, three, five, seven, and ten-year options. Like the variable-rate type, adjustable-rate mortgages also have generally lower interest rates during the course of the loan.  

Variable vs Adjustable-rate Mortgage

Whether you choose a variable-rate or adjustable-rate mortgage, it is good to understand the features of each. Due to their differing nature, one may be better suited for your specific situation. There are also hybrid options that combine both types. 

Variable-Rate Mortgage

  • Rates can change multiple times in a year. 
  • Monthly payments remain the same.
  • There are more changes that affect the amortization schedule.

Adjustable-Rate Mortgage

  • The interest rate fluctuates with the market. It can go up or down.
  • Your monthly payments are affected by the interest rate change.
  • Due to the nature of the changes, your amortization schedule will not be altered. 

Answering Your Mortgage Questions | The Reichert Mortgage Team

Whether deciding to choose a fixed-rate, variable, or adjustable home loan, The Reichert Mortgage Team will help you make the best decision for your financial future. As a Colorado mortgage company, we strive to provide you with educational resources that explain industry-specific language and clarify the various loan options. We take pride in being the best mortgage broker in Colorado. Contact our team today with any additional questions. 

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