Variable Rate Mortgage
A variable rate mortgage features interest rates that fluctuate based on benchmark rates, typically EIBOR, with payment amounts adjusting monthly or quarterly to reflect current market conditions.
| Rate Components | Structure |
| Benchmark | EIBOR (1-month or 3-month) |
| Bank margin | Fixed spread added |
| Total rate | Benchmark plus margin |
| Adjustment | Monthly or quarterly |
| Advantages | Benefit |
| Initial rate | Lower than fixed |
| Rate decreases | Full benefit captured |
| No lock-in | Flexibility to switch |
| Refinancing | No fixed-term penalty |
| Disadvantages | Risk |
| Rate increases | Payments can rise substantially |
| Budget uncertainty | Cannot predict exact costs |
| Market timing | Exposure to rate cycles |
| Affordability risk | May exceed comfortable levels |
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