IS A VARIABLE RATE MORTGAGE SIMILAR TO A HOME EQUITY LINE OF CREDIT?
Author: Boychuk Mortgage Group |
Somewhat! There is an initial approved total mortgage amount, the money is advanced, and there is an agreed upon monthly installment, based on an agreed amortization – a.k.a. ‘the life of the loan’.
Whereas, a HELOC may have the exact same balance forever with only the monthly interest being paid off. A VRM is initially set up with the idea that it will be paid off in full over 25 to 30 years. Hence the payment including both an interest portion, and a principal portion.
A VRM seems different than a HELOC, but as you will discover through this series of questions a VRM has some distinct HELOC-like characteristics. For instance, it allows the outstanding balance to move back upwards toward the original approved amount.