The variable-rate or “floating” mortgage is one of the most popular forms of mortgage. Unlike a fixed-rate mortgage (traditionally the most common form of home-mortgage loan in the United States), which is set and does not change, the rate of a floating mortgage changes over time to reflect the overall state of the economy and market conditions. In the United States, the changes to the interest rate are most commonly due to changes in the base borrowing rate set by the Federal Reserve.
Variable-Rate Mortgage Facts
Because many Americans are used to thinking of mortgages as fixed-rate loans, the variable-rate mortgage can initially be a confusing prospect. However, variable-rate mortgages actually offer benefits to both borrowers and lenders, namely:
- Because the risk of a changing interest rate is passed on to the borrower, lenders are ensured a return on their investment.
- The variable-rate mortgage reduces the margins of the cost of borrowing, which benefits the borrower.
Depending on the outside circumstances, a borrower could be more benefitted by a variable-rate mortgage than a fixed-rate mortgage.
Mortgages can be complicated, and in a bad economy, it’s easy to let a few missed payments get out of hand. The Milwaukee foreclosure defense attorneys of the DeLadurantey Law Office, LLC, may be able to help you protect your home. Contact us today by calling 414-377-0518.