A mortgage rate that is variable means that the interest rate is calculated by a relationship to the prime lending rate. A variable rate will be quoted as Prime plus or minus an amount to arrive at the rate the interest will be calculated. Example 1: Prime minus 0.50%, if prime is 6.95% the rate will be 6.95% – 0.50% = 6.45%; 6.45% is the rate that interest will be calculated on the loan. If the prime rate changes (6.95%) up or down, then the calculation rate will also change by the same amount. Example 2: Prime changes from 6.95% to 6.70% (-0.25%) then the interest rate in Example 1 will also drop from 6.45% down by the same -0.25% to 6.20%. Variable interest rate mortgage terms will have fixed payments for the term, but the amortization can change affecting the outstanding balance of the loan in prime rate change up or down. There is a specific type of Variable rate interest term know as an Adjustable-Rate Mortgage Term where the regular payment goes up and down when prime rate changes instead of the amortization changing.