An adjustable-rate mortgage is one that

The correct answer is that changes periodically throughout the life span of the loan.

Explanation:

1. A variable rate mortgage means that the interest rate on your loan can change. The variable rate fluctuates along with the base interest offered by the national central bank. For example, the Bank of Canada, the federal funds of the United States of America, the London Interbank Offered Rate (Libor), the Euro Exchange Interbank Offered (Euribor), etc.

2. In short, the base rate reflects market conditions, and its variable mortgage rate combines a variable interest with an additional margin. For example, a variable interest rate could have a base rate + 1%, and you have to renew the contract annually.

3. A variable rate financing is convenient for people with a flexible budget, who are not afraid to take risks. A homeowner can choose a variable interest rate in the hope that the base rate will decrease over time and thus be able to take advantage of reduced payments. At the same time, the variable interest rate may increase causing your monthly payment to rise as well. The longer the term of the loan, the riskier is the variable rate loan because there is more time for the rates to increase. In conclusion, it is unpredictable to know if the rate will increase or decrease.