Adjustable Rate Loan/Mortgage
Accounting glossary · Understand, connect, apply
An adjustable-rate loan or mortgage has an interest rate that can reset under the contract, often using a reference index plus a margin.
Example
A loan resets annually to the specified reference rate plus two percentage points, subject to contractual caps.
Remember the difference
A low introductory rate does not establish the future payment. Review reset dates, rate floors, caps, fees and repayment terms.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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