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Simple English definitions for legal terms
renegotiable-rate mortgage
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A quick definition of renegotiable-rate mortgage:
A renegotiable-rate mortgage is a type of loan that is used to buy a house. The interest rate on the loan can change every few years based on what is happening in the economy. This means that the amount of money you have to pay back each month could go up or down. The loan is called "renegotiable" because you and the lender will need to agree on the new interest rate every time it changes.A more thorough explanation:
A renegotiable-rate mortgage is a type of mortgage where the interest rate is adjusted periodically based on market conditions. This type of mortgage requires the mortgagee to renegotiate its terms every three to five years. It is also known as a flexible-rate mortgage or a rollover mortgage.
For example, if a borrower takes out a renegotiable-rate mortgage with an initial interest rate of 4%, the interest rate may be adjusted to 5% or 3% after three to five years, depending on market conditions. This means that the borrower's monthly payments may increase or decrease based on the new interest rate.
Renegotiable-rate mortgages are beneficial for borrowers who expect interest rates to decrease in the future. However, they can also be risky for borrowers who cannot afford higher monthly payments if interest rates increase.