Variability is also known as floating interest rate/adjustable rate. Such credit consistently uses base rate or an index to establish the interest rate for each applicable period. For example a five year loan may be valued at interest rate payment at every six-month. The base is agreed between the lender and the borrower.
Usually a variable home loan with floating interest rate is better than the fixed rate loan as it costs less than fixed rate loans depending in part on the yield curve. This low loan rate attracts the borrower to take the risk of interest rate which might increase. When the yield curve is higher in some cases, the cost of interest may get higher. In some cases a maximum change in interest rate is sometimes also allowable.
The total payment of rate floats is adjustable. The loan tenure might be longer than the interest rate period. Like a 25 year mortgage may be priced off in only 6 months. Floating rate loans are most common in banking industries and large corporate customers. Variable Home loan is referred with other names to predominate and publicize it in the countries and also among the customers internationally.
In many countries such as Canada, the providence of floating rate loans is considered as a social norm. The benefit of a variable rate loan is that whether the rate is rising or falling or flat, you are paying the market price for housing debt, in that particular time frame. One reason for this is that people who take a variable rate loan might assume that they can find extra funds if the rate rises.
Consequently, your payments will vary as long as your payments are blended with principal and interest. If interest rates are on the decline, then it would be better to apply for a variable home loan.