RATE INCREASES AND YOUR ARM VS. VRM

When rates rise, adjustable and variable rate mortgages react differently — and understanding the distinction can help homeowners protect their equity and stay ahead of their repayment goals.

Here’s what happens to your mortgage when prime rate increases 👇

1️⃣ What an ARM (Adjustable Rate Mortgage) means for your payment

An ARM adjusts your payment automatically whenever prime changes.

✔️ monthly payment increases as rates rise

✔️ payment decreases when rates drop

✔️ principal repayment remains consistent

Because the payment adjusts in real time, you continue to pay down your mortgage at the same pace.

2️⃣ What a VRM (Variable Rate Mortgage) means for your payment

A VRM keeps your payment the same even when rates rise.

✔️ monthly payment remains unchanged

✔️ less money goes toward principal

✔️ more money goes toward interest

This reduces the speed at which equity builds — and can slow down amortization significantly.

3️⃣ Why this matters in a rising rate environment

When rates rise:

✔️ ARM borrowers see their payment increase but maintain progress

✔️ VRM borrowers risk falling behind on amortization

✔️ mortgage equity grows slower with VRM structures

In extreme cases, a VRM can shift toward “interest-only” if payments aren’t adjusted.

4️⃣ What homeowners should review during rate changes

Homeowners should revisit their mortgage strategy when prime moves.

✔️ confirm how much of the payment goes to principal

✔️ consider voluntarily increasing payments

✔️ review amortization projections

✔️ assess long-term equity impact

Small payment adjustments can prevent interest-only scenarios and protect financial progress.

5️⃣ Why reviewing your structure with your lender is essential

Rate changes require proactive planning.

✔️ ensure payments remain effective

✔️ prevent negative amortization

✔️ adjust strategy based on goals

✔️ evaluate switching or converting options

The right advice ensures your mortgage continues to work in your favour.

💬 Final Thought

ARM and VRM products may sound similar, but they behave very differently when rates move. Reviewing your payment structure during rate changes helps protect your equity, maintain momentum, and avoid costly surprises.

For a personalized ARM vs. VRM review based on current rates, send The Frontline Mortgage Group a message anytime.