Variable-Rate Mortgage (VRM) Law and Legal Definition
Variable-Rate Mortgage (VRM) is a type of mortgage loan program wherein interest rates and payments are adjusted as frequently as every month. In VRM, interest rate changes in response to changes in the main economic index. For example, change in treasury bill rate. Payment is adjusted periodically. The mortgage holder is protected by a maximum interest rate called a ceiling. Ceiling is reset annually. In order to compensate the mortgagor with additional future risk that may occur in future, VRMs usually start with better rates. Initial interest rate is lower in VRM than fixed-rate mortgages.