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A variable rate mortgage, also known as an adjustable-rate mortgage (ARM), is a type of mortgage that has an interest rate that can fluctuate throughout the term of the loan. This is in contrast to a fixed-rate mortgage, where the interest rate remains the same for the entire term of the loan. While a fixed-rate mortgage may seem like a safer and more stable option, there are actually many positive benefits to choosing a variable rate mortgage. In this article, we will explore the advantages of a variable rate mortgage.

1. Lower Initial Interest Rate
One of the main benefits of a variable rate mortgage is that it typically offers a lower initial interest rate compared to a fixed-rate mortgage. This can be advantageous for homebuyers who are looking to get the best deal possible on their mortgage. With a lower interest rate, borrowers can save money on their monthly mortgage payments, allowing them to allocate more funds towards other expenses.

2. Potential for Savings
The main reason for the lower initial interest rate on a variable rate mortgage is due to the fact that the interest rate can change over time. While this may seem like a disadvantage, it can actually work in the borrower's favor. If interest rates decrease, the borrower's monthly payments will also decrease, resulting in potential savings over the life of the loan. On the other hand, if interest rates increase, the borrower's monthly payments will also increase, but this is balanced out by the initial lower interest rate.

3. Flexibility
Another positive aspect of a variable rate mortgage is its flexibility. With a fixed-rate mortgage, borrowers are locked into a set interest rate for the entire term of the loan. But with a variable rate mortgage, the interest rate can change periodically, giving borrowers the opportunity to take advantage of market fluctuations. If interest rates drop, borrowers can benefit from lower monthly payments, and if they rise, borrowers can choose to refinance to a fixed-rate mortgage.

4. Shorter Term Options
Many variable rate mortgages offer shorter term options, such as 3 or 5 years. This can be appealing to borrowers who don't want to commit to a 15 or 30-year fixed-rate mortgage. Shorter term options can also be beneficial for those who are planning to sell their home in the near future, as they can take advantage of the lower initial interest rate and potentially sell their home before the interest rate adjusts.

5. Points and Fees
Variable rate mortgages often have lower costs associated with them, such as points and closing fees. This can save borrowers money upfront and make the mortgage more affordable. Additionally, borrowers may be able to negotiate a better deal on these fees with the lender, as they can be more flexible when it comes to variable rate mortgages.

In conclusion, while some may view a variable rate mortgage as risky, it actually offers many positive benefits for borrowers. With a lower initial interest rate, potential for savings, flexibility, and shorter term options, a variable rate mortgage can be a smart choice for homeowners looking to save money and have more control over their mortgage. However, it is important for borrowers to carefully consider their financial situation and consult with a mortgage advisor before choosing a variable rate mortgage.