What is rate variance?

A rate variance is the difference between the actual price paid for something and the expected price, multiplied by the actual quantity purchased. The concept is used to track down instances in which a business is overpaying for goods, services, or labor.

When can the interest rate on a VRM be adjusted?

On your mortgage funding date, the initial interest rate is set, locking in the interest rate spread. Every three months after that (referred to as the Interest Rate Adjustment Date), the interest rate on your VRM is subject to review and possible adjustment, either up or down, if the prime rate changes.

What is mortgage VRM?

By The Spy on October 17, 2016. « Back to Glossary Index. This is a mortgage with an interest rate that is not fixed. Its rate typically changes when its benchmark (usually prime rate) changes.

What is variance interest rate?

What Is a Variable Interest Rate? A variable interest rate (sometimes called an “adjustable” or a “floating” rate) is an interest rate on a loan or security that fluctuates over time because it is based on an underlying benchmark interest rate or index that changes periodically.

Is variable rate better than fixed?

Typically, the variable rate is lower than fixed, but can also float higher for periods. If you break the mortgage, the penalty is typically far lower. You can lock the variable rate into a fixed rate at any time, without breaking the mortgage.

Can you switch from variable to fixed?

And you can convert your variable rate closed mortgage to a fixed rate closed mortgage that has a term equal to or longer than the remaining term of your existing mortgage at any time during your term — without additional cost.

How high can a variable interest rate go?

Variable rates are often capped, but the caps can be as high as 25%. Rates typically start out lower than fixed rates. You could save on interest if variable rates don’t rise by too much.

What happens if the variable rate goes up?

With a variable loan, you can make extra repayments as you wish, whereas a fixed home loan requires a fee. By getting ahead of your mortgage and paying a larger lump sum when interest rates go up, you will reduce the amount of interest that is charged by reflecting it against a lower loan balance.

What’s better fixed or variable mortgage?

If the financial uncertainty of a variable-rate mortgage doesn’t scare you, in a low-interest rate environment, a variable-rate mortgage could be a better choice because the rate is likely to be lower than a fixed-rate mortgage, which can save you a lot of money.