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| VARIABLE-RATE MORTGAGE (VRM) |
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Related Terminology: SUBORDINATE MORTGAGE
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| a long-term mortgage loan applied to residences, under which the interest rate may be adjusted on a 6-month basis over the term of the loan. Rate increases are restricted to no more than l/2 point per year and 21/2 points over the term. |
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| Example Abel obtains a variable-rate mortgage originated at a 6% interest rate. In 6 months, the index upon which the rate is based increases by one percentage point. Abel’s rate is adjusted to 61/2% and cannot be further increased during the year because of the 1/2% annual cap. |
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